When did it become offensive to pay cash for a car?

[amastewa93]

I've found this speaking with friends of mine recently as well. A close friend of mine and I were talking about paying off debts - student loans are my major debt currently. While she has MORE student loan debt than me, she's also managed to rack up nearly $30,000 in credit card debt.

When I heard that I told her I'd be in tears (I would)... I couldn't fathom being that far in debt. To which she responded, "that is how our entire economy works. We borrow, pay for things, and eventually pay it back." Meanwhile, she works about 40 hours a week for around $15 an hour... how will she ever pay it back while she continues to pay cash for NOTHING and save NOTHING? It is frustrating to watch... and more frustrating that there are tons of people that think that way.

[AJSimon]

My Mother discussed this plan with an aunt and uncle, and came back with a lot of feed back from my uncle of what a horrible idea this was. It would make me a target for IRS audits, and I would loose tax benefits (I am talking about a car, not a house) and a few other off the wall thoughts. While I am sure he is well meaning in all of his advice, I think he is much like your average American who thinks a car payment is just a way of life.

I wonder how an IRS audit would even come about in this situation. Is the dealer supposed to report you to the IRS for making a cash purchase?

[bjl584]

I wonder how an IRS audit would even come about in this situation. Is the dealer supposed to report you to the IRS for making a cash purchase?

If you walked into the dealership with an actual suitcase full of cash it might raise some red flags.

But, if you are writing a check, then there shouldn't be an issue.

[disneysteve]

If you walked into the dealership with an actual suitcase full of cash it might raise some red flags.

But, if you are writing a check, then there shouldn't be an issue.

Correct. Cash transactions of 10K or more must be reported. No problem with checks.

[TexasHusker]

Old people are often scared to death of the IRS. I have no idea why.

[AJSimon]

Correct. Cash transactions of 10K or more must be reported. No problem with checks.

Is a debit card transaction treated like cash or a check?

[disneysteve]

Is a debit card transaction treated like cash or a check?

The only thing treated like cash is cash. Actual physical dollar bills. The reason is that cash can’t be traced so it’s preferred by criminals.

A debit card transaction has a trail.

Good luck buying a car with a debit card though. I doubt you’ll find a dealer willing to do that because of the processing fee. Either that or they will want to charge you 3% more.

[MooseBucks]

The only thing treated like cash is cash. Actual physical dollar bills. The reason is that cash can’t be traced so it’s preferred by criminals.

A debit card transaction has a trail.

Good luck buying a car with a debit card though. I doubt you’ll find a dealer willing to do that because of the processing fee. Either that or they will want to charge you 3% more.

Checks are cash equivalents and will trigger reporting.

[TexasHusker]

Checks are cash equivalents and will trigger reporting.

That is incorrect. However, it is most important to understand that there is nothing wrong with having large amounts of cash and dealing in large amounts of cash. It is simply a requirement of banks that they report any cash deposit of over $10K to the IRS. It is highly unlikely that the IRS would then inquire further - folks deposit $10K and more every minute of every business day of the year throughout the country.

Unless you are engaged in money laundering or racketeering, or are cheating on your taxes, there is nothing to worry about. A big, big mistake is "deposit structuring" to avoid the report. It is absolutely STUPID to go depositing $9K one day and $1K the next, as it appears nefarious and there will much more likely be an inquiry. People acting guilty often are.

As a side note, I have a neighbor who I suspect has been money laundering for many years and I presume if he hasn't been caught by now, he never will be. He owns a front business - a tree trimming business - but has an incredible lifestyle with fancy exotic cars, a pool, a $200K RV, Mercedes, Hummer, Bentley, two or three $60K 4X4 pickups - pretty much you name it.

I know full well that a small tree trimming business doesn't pay that sort of jack because I know of another tree trimmer who has told me so. The business used to be a corporation, and the last tax filing they did, I think the business did around $70K. I suspect that my neighbor has some sort of illegal/borderline illegal cash business, and he launders all his cash in his various toys and equipment for his front business. He also has workers scrubbing his place many hours every week - I am quite sure just paying them in cash.

My only beef is that the knucklehead is running a tree trimming business out of his home in a residential neighborhood, which is a blatant code violation, but that is another story altogether.

[disneysteve]

Checks are cash equivalents and will trigger reporting.

This is incorrect. A personal check is not treated as cash and does not need to be reported. A cashiers check or travelers check or money order is also not treated as cash when you receive it. If those items were purchased with cash the bank or other seller needs to report that transaction at that time. But a car dealer would not report a transaction where the buyer paid by check or money order. Only physical cash.

[disneysteve]

Okay. There are actually some nuances to the rules ( why would the IRS make anything simple?). There are situations where a cashiers check or money order might be counted as cash but a personal check never is.

[MooseBucks]

This is incorrect. A personal check is not treated as cash and does not need to be reported. A cashiers check or travelers check or money order is also not treated as cash when you receive it. If those items were purchased with cash the bank or other seller needs to report that transaction at that time. But a car dealer would not report a transaction where the buyer paid by check or money order. Only physical cash.

Correct that the car dealer isn't reporting the personal check. The bank is.

[disneysteve]

Correct that the car dealer isn't reporting the personal check. The bank is.

I don't believe that's correct. A personal check drawn on my own account is not a cash transaction. It's not subject to the cash reporting rule.

[TexasHusker]

I don't believe that's correct. A personal check drawn on my own account is not a cash transaction. It's not subject to the cash reporting rule.

Banks aren't reporting to the IRS checks written over $10K, nor deposits. My gosh, the banks would have to have a staff to keep up with that, as would the IRS.

My businesses have deposits over $10K regularly; the bank isn't reporting those to the IRS.

[disneysteve]

Banks aren't reporting to the IRS checks written over $10K, nor deposits. My gosh, the banks would have to have a staff to keep up with that, as would the IRS.

My businesses have deposits over $10K regularly; the bank isn't reporting those to the IRS.

Exactly. It's only CASH transactions that are subject to reporting. Not checks.