Question about taxes on a sale price

[RT6PK]

Has anyone ever gotten stuck paying taxes on the money that you received for a car that you sold? Does the IRS consider that taxable income? I would love to talk to my accountant, but she is out of the office right now.

 

[hunt2elk]

I got audited last year. They nailed me on a car that I sold because I didnt keep a record of what money I put into it.

 

[MarPar]

Has anyone ever gotten stuck paying taxes on the money that you received for a car that you sold? Does the IRS consider that taxable income? I would love to talk to my accountant, but she is out of the office right now.

If you get paid in cash it's not taxable income

 

[VANDAN]

Why would you pay tax on something you sold ? It's usually the buyer's responsibility to pay a tax when registering, or transferring ownership on a vehicle. I would think when selling a restored classic vehicle, you should be able to take a credit on your taxes for a "loss", as I don't know too many folks that ever make money on these sales...

 

[biomedtechguy]

Have any medical equipment repair questions?
Lol.

 

[Tim Chavez]

I won a Harley sportster at a dealership party’s few years back and ended up playing a bunch in taxes that I wasn’t expecting. ( the dealetship made me pay sales tax then the irs hit me for income tax) It’s my belief that if they can bend you over they definitely will

 

[PurpleBeeper]

Yeah, it sucks. Any money you take in from the sale of the car is considered income, except as hunt2elk said, if you can prove you had to restore it, so to speak....e.g. sell a car for $10,000, but show receipts that you spent $3,000 to restore it first, you only have $7,000 income from the car.

AND....the guy buying the car has to pay sales tax on it too. Death & taxes....

 

[VANDAN]

Yeah, it sucks. Any money you take in from the sale of the car is considered income, except as hunt2elk said, if you can prove you had to restore it, so to speak....e.g. sell a car for $10,000, but show receipts that you spent $3,000 to restore it first, you only have $7,000 income from the car.

AND....the guy buying the car has to pay sales tax on it too. Death & taxes....

That's kind of interesting ? Using round numbers, if you "invest" $100K into the restoration of a car, and can only sell that car for $60K, you could claim a $40K loss on the investment, thus taking that off your yearly income ? I would think people would be jumping on that wagon, if that works like that ?

 

[Tim Chavez]

Yeah, it sucks. Any money you take in from the sale of the car is considered income, except as hunt2elk said, if you can prove you had to restore it, so to speak....e.g. sell a car for $10,000, but show receipts that you spent $3,000 to restore it first, you only have $7,000 income from the car.

AND....the guy buying the car has to pay sales tax on it too. Death & taxes....

So can you make invoices for your time? Say you charge yourself $100/hour for labor?

 

[Fran Blacker]

You sell a car and make large profit money you better get paid in cash. Even then you can't put it in the bank, that $10.000 or more deposit is reported to IRS. Accountant where I worked said even being paid in cash can be a problem. Guy withdraws $50k to buy your car in cash, 3 years later sells the car and want deduct the $50k purchase price from his profit. Well you gave him a receipt for $10k. He shows the IRS he withdrew $50k cash on the day he paid you. The IRS sits back and watches the pissing contest. Not to say it will happen but it could. Accountant said the fine is triple what should have been paid.
A local woman in my town found $300,000+ in the attic of her parents house after they died. She smurfed (making deposits under 10k) the money into the bank. The IRS found out and she was fined AND spent 3 or 4 years in prison. That one fine "how do you do".
Edit: Your profit could be a capital gain?

 

[Johnpat]

Report the sale under Rev.Al Sharpton he
never pays taxes or goes to jail

.

 

[mopar_chuck]

Wow! I did not realize that at all! You guys have it rough with the tax man and I thought it was bad up here in Canada!

 

[GetX'd]

I will never pay taxes on a car I sold. I don’t believe it’s taxable income. Your buyer will have to pay registration taxes - help them out by declaring the car a gift or a much smaller amount. Then you both can be assured little to no taxes paid. Have them then pay you in cash.

 

[hunt2elk]

If you get paid in cash it's not taxable income

Problem was that I bought it on the internet from California and sold it to a guy in Germany. So wire transfers both ways and the IRS finds absolutly everything with a paper trail.

 

[MarPar]

Problem was that I bought it on the internet from California and sold it to a guy in Germany. So wire transfers both ways and the IRS finds absolutly everything with a paper trail.

Yep. That'll do it. So if you have enough receipts to offset the selling price then they cant ding you, right?

 

[NJRR]

Unless you or the other party gets audited, it's unlikely the IRS will find out about it. When the car is registered, it is the state that collects sales tax on it. If the IRS doesn't get a 1099 indicating a payment, they wouldn't know about it. As for VANDAN's hypothetical about deducting the $40k loss against your yearly income, I believe there's a $3k annual max you can deduct for capital loss, with the rest having to be carried over to following years.

 

[GetX'd]

What about progress pictures vs receipts?

 

[ws23jrt]

If you get paid in cash it's not taxable income

Everyone has a personal responsibility to report ALL income to the IRS.--Gambling winnings, income from illegal drug sales, found bags of currency, etc.
Let your conscience be your guide.

 

[hunt2elk]

Yep. That'll do it. So if you have enough receipts to offset the selling price then they cant ding you, right?

Yep, if I would have kept receipts for any part I put on the car I would have been ok. I now have a folder for each of my cars for all receipts. They wont give credit for any labor, but at least the parts can be written off. It would be nice if all purchases and sales of these cars could be in cash, but with the value that some of them are commanding and some buyers just wont come to look at them in person there will be more and more wire transfers in the future imo.

 

[tlt23]

Yes you have to pay the tax. If you write a contract have a seperate line just for that and make the buyer pay it.
2300 Car (the price you want for car)
300 tax (paid by buyer)
2600 total.... (hard price to get when you advertise 2300)
Then you report it on taxes and you have to send it in or it is unclaimed money(income). That is why everyone sells cars for 10.00 when they do a bill of sale for DMV because the record will show at the end of the year you owe 10 cents.