Results 1 to 11 of 11

Thread: Buying a car with 9500 cash

  1. #1
    Veteran Member SweetPinkCupcake's Avatar
    Joined
    Aug 2011
    Posts
    605
    Thanks
    1,240
    Thanked 1,441 Times in 386 Posts

    Default Buying a car with 9500 cash

    Am I going to get looked at with a fine tooth comb if I do this? I am going to buy a car on Saturday from a private seller with cash, obviously it is just under 10k. Please no lectures, I'm just wondering if anybody had a personal experience with this. Thanks

  2. #2
    Senior Member Cheyennedaisy's Avatar
    Joined
    Jan 2013
    Location
    colorado
    Posts
    123
    Thanks
    56
    Thanked 60 Times in 30 Posts

    Default Re: Buying a car with 9500 cash

    have you had a mechanic that you trust look at it?

  3. The Following User Says Thank You to Cheyennedaisy For This Useful Post:


  4. #3
    God/dess shasta's Avatar
    Joined
    Sep 2005
    Posts
    2,175
    Thanks
    778
    Thanked 658 Times in 317 Posts
    My Mood
    Breezy

    Default Re: Buying a car with 9500 cash

    With a private seller can't you ask them to write a different price on the bill of sale? In the past when I have bought cars like this the seller actually wanted to write a lower price so they would pay less tax.

  5. The Following 2 Users Say Thank You to shasta For This Useful Post:


  6. #4
    Banned
    Joined
    Aug 2011
    Location
    Aboard The Spaceship
    Posts
    4,787
    Thanks
    3,183
    Thanked 10,142 Times in 3,290 Posts
    My Mood
    Breezy

    Default Re: Buying a car with 9500 cash

    Quote Originally Posted by shasta View Post
    With a private seller can't you ask them to write a different price on the bill of sale? In the past when I have bought cars like this the seller actually wanted to write a lower price so they would pay less tax.
    Though not really legal, most people write the amount of half the price. So you paid 10k for it? Seller will usually write 5k. Less tax for them to pay, and less for you to pay.

  7. #5
    Veteran Member SweetPinkCupcake's Avatar
    Joined
    Aug 2011
    Posts
    605
    Thanks
    1,240
    Thanked 1,441 Times in 386 Posts

    Default Re: Buying a car with 9500 cash

    ^^ Doh!! Lol, how did I not think of that. thanks

  8. #6
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Buying a car with 9500 cash

    whatever amount is listed on the sales receipt you must present when you register the car will be the amount that the state DMV title agency will report to the IRS. This now gets checked against blue book values, so it can't be outrageously low.

  9. #7
    Banned
    Joined
    Aug 2011
    Location
    Aboard The Spaceship
    Posts
    4,787
    Thanks
    3,183
    Thanked 10,142 Times in 3,290 Posts
    My Mood
    Breezy

    Default Re: Buying a car with 9500 cash

    Quote Originally Posted by Melonie View Post
    whatever amount is listed on the sales receipt you must present when you register the car will be the amount that the state DMV title agency will report to the IRS. This now gets checked against blue book values, so it can't be outrageously low.
    It can't be outrageously low, but the DMV/IRS/whomever has no way to tell if you bought a car in pristine condition, or a car that needs a ton of work. And they have no way to tell how much money you will spend on the work being done on a car that's selling for half the price. For all they know, you could be bartering to get the work done, or doing it yourself. For all they know or don't know, your hobby is being a mechanic and fixing things yourself on your car that would cost big bucks in the shop!

  10. #8
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Buying a car with 9500 cash

    ^^^ by 'outrageously low', I meant a figure that was perhaps less than 1/3 of the blue book value. Granted that legitimate reasons may exist for such low priced sales, but the 'flag' set by computers checking sales price against blue book value will probably wave a 'red flag' nonetheless. The buyer will then get the privelege of making their explanation to the IRS about the car purchase, and likely making explanations regarding other aspects of their finances / taxes that the IRS may question.

  11. #9
    God/dess Zofia's Avatar
    Joined
    Apr 2002
    Location
    Durham, North Carolina
    Posts
    2,417
    Thanks
    2,964
    Thanked 2,370 Times in 934 Posts

    Default Re: Buying a car with 9500 cash

    In NC, our sales tax is capped at $1500, so the DMV doesn't really care what you paid for the car as long as it was more than $21,428.57. The county tax collector doesn't care either because they assess every car at its "blue book" value regardless of how good, bad or indifferent it is. Of course, the DMV and Department of Revenue do care if you paid less than $21,428.57 because if you undervalue the car, they lose out on sales tax. They will check and if you are much below "blue book" they won't accept your value. Instead they'll just charge you based on the "book" and leave you to pound sand.

    The IRS really only cares if you pay cash and don't seem to have the income to support the transaction. For example, if you claimed on your 2012 tax return to have made $20,000 and had one child thus qualifying for the earned income tax credit and then turned around and paid $9,500 cash for a new car, that would raise two inquiry flags. First for the EITC and second for the unsupported cash transaction. Currently, the IRS is looking very closely at everyone who claims the EITC. In my example if you claimed a W-2 job that paid 20,000/year and withheld properly, you would get an EITC of $3,700. In that circumstance if you reported no interest income, the IRS would wonder just how you managed to save the rest of the money for a cash payment of $9,500.

    Following that example forward, if you listed waitress as your occupation and did not report tip income, the IRS would probably credit you with at least $6,000 in tip income, if not more and then assess a huge deficiency along with a penalty for falsifying a tax return. OUCH!

    Now let's look at a dancer who reports $20,000 in Schedule C income because that's what she has 1099s for. The stripper claims one dependent child with $1,200 of child care expenses and $500 of state taxes, but no quarterly estimates. Most of her EITC would be consumed by self-employment tax but she'd still get something back, about $1,300. Not great but not bad for paying nothing in. Still, the IRS would see two inquiry flags when the $9,500 cash car purchase found its way to them. This time, they'd probably credit the taxpayer with at least $9,500 in extra income and assess a very large penalty along with the tax.

    If the dancer in my second example had been paying her estimates and was entitled to the EITC the IRS might be less inclined to inquire. They like taxpayers who exhibit a culture of compliance. Filing estimates is a good way to foster that "culture of compliance" the service is looking for.

    Let's take a final example. Dancer taxpayer reports $20,000 on Schedule C because that's how much she has on 1099s. She files her quarterly returns. She claims interest income of $100, some education expenses to go along with her child care expenses and of course one child. She gets the full EITC in that situation and the IRS computers expect that the $9,500 cash payment for the car came from her savings account (the account that generated the interest she claimed on her tax return) and all is well. Only one inquiry flag, the EITC and it appears appropriate.

    HTH
    Z

  12. The Following User Says Thank You to Zofia For This Useful Post:


  13. #10
    God/dess rickdugan's Avatar
    Joined
    Apr 2010
    Location
    NYC
    Posts
    4,570
    Thanks
    4,406
    Thanked 7,481 Times in 2,715 Posts
    My Mood
    Amused

    Default Re: Buying a car with 9500 cash

    Quote Originally Posted by Zofia View Post
    They will check and if you are much below "blue book" they won't accept your value. Instead they'll just charge you based on the "book" and leave you to pound sand.
    This. I've been involved with two different automobile transactions over the last decade where the DMV assessed blue book value in lieu of what I payed. One involved a situation similar to this, where both the seller and I were looking to minimize the tax consequences. The other involved a transfer of a car into my name as part of a relationship wind down and I was assessed the "transfer tax", based upon blue book value, even though I did not give her any cash for the car (in fact, I was the one who actually financed the vehicle to begin with, so I essentially payed the sales tax twice - lol).

  14. #11
    Veteran Member Doc Holliday's Avatar
    Joined
    Oct 2011
    Location
    Dallas, TX
    Posts
    559
    Thanks
    804
    Thanked 248 Times in 133 Posts
    My Mood
    Angelic

    Default Re: Buying a car with 9500 cash

    Quote Originally Posted by GlamourRouge View Post
    Though not really legal, most people write the amount of half the price. So you paid 10k for it? Seller will usually write 5k. Less tax for them to pay, and less for you to pay.
    Yeah, this no longer works in Texas. No matter what you paid for the vehicle, when you register/get your tags, you pay taxes on the blue book value (as Rick said).

    Shop around, girly! Use www.autotrader.com, www.carsforsale.com, and craigslist to compare prices. When you find the car you want, spend $40 on a www.carfax.com to see what wrecks/damage has been done.

    If you can get it under what other like cars are selling and it's what you want, you are set like Jett! Then, ask for maintenance records when buying it. And then, as others said, after the purchase take it to a mechanic. Last, expect an additional $1000 for repairs. You may not need it, but at least it's there if you do.


    EDIT: damn I just realized you already got the car last Saturday. Hope it went well!
    Nope silly, its just a persona that entertains the masses, yourself included. - KS_Stevia

    - -
    (everything I post should be considered a work of fiction)

Similar Threads

  1. buying my first car
    By minniesoporno in forum The Lounge
    Replies: 15
    Last Post: 06-01-2009, 08:30 AM
  2. Buying a car but how?
    By Lady Xplicit18 in forum Dollar Den
    Replies: 8
    Last Post: 05-27-2009, 08:37 PM
  3. Buying A NEW Car
    By madmaxine in forum Dollar Den
    Replies: 22
    Last Post: 01-14-2008, 07:37 PM
  4. New car: Talk down the price if buying in cash?
    By hearts in forum Dollar Den
    Replies: 35
    Last Post: 05-25-2007, 06:57 AM
  5. Buying a Car
    By JustineTaylor in forum Dollar Den
    Replies: 31
    Last Post: 12-04-2004, 06:26 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •