Federally Mandated Form Updates

Now that August is here, there are some revisions to forms that you use in your dealership of which you should be aware.
Adverse Action and Risk Based Pricing Notices
As of July 21, 2011, your dealership will be required to be using updated adverse action and risk-based pricing notices. Here is what the notices must disclose:  
1)         the consumer’s credit score;
2)         the range of possible credit scores under the model  used to generate the score;
3)         the key factors that adversely affected the   consumer’s credit score in the model used;
4)         the date on which the score was created; and
5)         the name of the person or entity that provided the credit score.
You should discuss this with your present supplier of adverse action and risk based pricing forms to be sure that you are using the appropriately updated versions.
IRS Form 8300
The IRS has revised Form 8300 for reporting receipt of cash in excess of $10,000. The revisions do not appear to affect the two pages of the form that are filled in by a dealer. The form does, however, mandate that it is the version to be used for transactions after June 30, 2011. Consequently, if you have hard copies of IRS Form 8300 that are not the June 2011 revision you should discard those. Go online to www.irs.gov and access the online Form 8300. It can actually be filled in online, and by that method you will ensure that you are using the most current form.
And while you are checking to make sure that you have available the right IRS Form 8300, you might want to review with your staff the store’s procedures for reporting qualifying cash. You may also want to see if your staff has any misconceptions about the program. Here are some common ones.
  • The customer is financing the car so this isn’t a cash deal where we have to report the $11,000 cash downpayment to the government.
False! Dealers are required to report receipt of cash in excess of $10,000 on an IRS Form 8300 within fifteen days of receipt and to notify the customer that receipt of the cash was reported. Sometimes dealer personnel overlook reporting cash received on a financed deal because they don’t view it as a “cash” deal as that term is used in the car business. The vast majority of deals that have led to IRS penalties for non-reporting have been financed deals for expensive vehicles with cash downpayments in excess of $10,000. If you receive cash or cash equivalents such as money orders, travelers checks or cashier’s checks with a face amount of $10,000 or less, which when combined total more than $10,000, report the receipt to the IRS even if the deal is financed.
  • The general office has the responsibility to report the receipt of cash. Our process should be OK, right?
Maybe not. Do not make the general office solely responsible for compliance. In cash reporting situations, there is information that may not be available if the compliance process does not start on the sales floor. Identification of a person in addition to the vehicle buyer who provides cash and itemization of the number of $100 bills are examples of information required by an IRS Form 8300 that will generally be unavailable if the cash reporting process starts in the general office. 
  • I have one person who is very good at spotting deals with more than $10,000 in cash. If our store ever has a problem, the government will agree that this is a solid system, right?
Not necessarily. When the cash reporting responsibilities were originally created twenty years ago, $10,000 bought many cars. Today, $10,000 is just a nice down payment, and alarm bells sometimes don’t ring in the sales department when a cash down payment in excess of $10,000 is received in a deal to be financed. That’s why back up is critical. One solution is to use the capabilities that most DMS vendors provide to run a report to identify transactions that should be reported. To activate these reports, cashiers must be trained to code receipts accurately about the form of funds received in a deal.
  • Since the law allows us to wait until next January to notify customers that we filed IRS 8300 forms this year, we will send them all at one time then. That’s legal, right?
Yes, it’s legal. But it is not the best way to proceed. You really should know if someone has given you a bad address so that you can follow up and report the deal to the authorities if you become suspicious. The earlier that you send a notification that you filed an IRS Form 8300, the better the chance that you will know if the notification bounces so that you can investigate.