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IRS to audit Ferrari and Rolls Royce owners

Discussion in 'Ferrari Discussion (not model specific)' started by kdross, Apr 4, 2004.

  1. kdross

    kdross Formula Junior
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    Last night on KYW 1060AM (Philadelphia's News Radio Station) a ran story stating the IRS is going to be auditing the returns of people who own expensive cars; specifically Ferraris and Rolls Royces. According to the story, the IRS is accessing vehicle registration information from all 50 states. They will be searching for owners of expensive cars (e.g. Ferraris) and then reviewing their tax return to determine if they can "afford" their expensive car (Ferrari) based on the income reported on their return. If this story is true, this is an outrage.

    Considering that the IRS, as do most people, consider any Ferrari to be worth $100K plus, many of us will be facing potential audits by the IRS. I am sure that there are many people on this site who have worked hard for most of their life, and after 20 years of saving can finally afford a $40K 308/328/330. Does this make them rich - NO!!! As to Rolls Royces, 80% of all Rolls Royces on the road cost less than $50K, and probably 1/2 the Rolls Royces on the road are worth $30K or less.

    If this story is true (I cannot locate the story on Google or KYW’s website – sorry), we are all in trouble. This new policy would appear to violate numerous laws and is very similar to profiling that law officials came under fire for several years ago. In addition, this theory is flawed. The IRS should not be going after us Ferrari owners, but the owners of expensive SUV’s. Unlike us Ferrari owners who can usually sell their car for the same price they paid for it, SUV owners will lose most of the vehicle’s value when they go to sell it. Let’s compare the average income of a 308/328 owner to that of an owner of a new Range Rover or Porsche Cayanne. I am sure that the Ferrari owners income will be much lower.
     
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  3. nickdtm

    nickdtm Rookie

    Mar 21, 2004
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    That has to be a joke. It's none of the government's business if people can afford the cars they drive or not.
     
  4. SefacHotRodder

    SefacHotRodder F1 World Champ

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    April Fools? Way late though. If its not, that sucks. How can they even do that? Also, isn't that some kind of government stereotyping? Most mercs on the road cost more than the rollers.
     
  5. Doody

    Doody F1 Veteran

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    this would be an AWFUL lot of work for the IRS to actually bother to do. i imagine there are a dozen other more-obvious audit-triggers in your actual federal tax forms.

    now the state revenue guys would have, in theory, easy access to that data.

    and the fact of the matter is, if you were going to do that, you wouldn't access REGISTRATION information, you'd access PROPERTY TAX / EXCISE TAX information instead (most states have this, i believe), which would be no more effort than registration data and would be WAY more informative, since usually the property tax is actually linked to the value of the car - so the 308 owners would have piddling property tax and thus might as well own a beater toyota camry.

    my two pennies.

    doody.
     
  6. kdross

    kdross Formula Junior
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    The story ran last night, so I doubt it is an April fools joke. In addition, KYW is the highest rated station in Philly, and is a 24 hour news station. They are not known for running false stories.

    Ken
     
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  8. ralfabco

    ralfabco Two Time F1 World Champ
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    Time to convert to Lamborghinis ? Cmon now you really have a reason to
    see the light. BananaBoat, Clax, and....... ?


    The IRS agent does not know what a Lamborghini is.
     
  9. kdross

    kdross Formula Junior
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    Doody:

    Once they have the registration info, they could then run a computer program to do the work for them. I would assume that this entire process is automated and requires very little work on the part of the IRS. An obvious offender would be the owner of a brand new 575 or 360 and reporting an income of $50K. A computer program would be able to pick that up quickly.


    The real question is how the IRS would handle the informtion. Would they flag all Ferrari owners with an income below X, or will they use market value for each model and make a determination as to how much of an income you need to afford that particular car. Either way it will cause problems for us owners if this story is true.

    Ken
     
  10. Doody

    Doody F1 Veteran

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    of course. but that's not unlike saying "once you part the red sea, it's easy to walk across it" :)

    the states have tough times communicating offenses amongst themselves from registry to registry. and this is IMPORTANT for them to do vis-a-vis insurance information.

    i find it hard to believe that all 50 states are going to trivially up and get their data to the feds.

    certainly i'ts possible, i just have a hard time believing it's probable. as i said, i think there are probably a dozen other indicators in your return that can more accurately trigger an audit.

    think about it: what percentage of people cheating big-time on their taxes are buying six-figure cars? it's a tiny percentage. it doesn't make a ton of sense.

    would be curious to hear DrTax's opinion of this, seeing as he's ex-IRS....

    doody.
     
  11. normhuff

    normhuff Formula Junior

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  13. Doody

    Doody F1 Veteran

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    ah, yes, lovely taxachusetts. it makes a TON of sense for states to crossref their own data. and as the story discusses, cars are just one piece of the equation (rationally). and i'm sure once they find an offender, they tell the feds all about it.

    doody.
     
  14. ralfabco

    ralfabco Two Time F1 World Champ
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    Dr. Tax "could" be undercover IRS. LOL
     
  15. thecarreaper

    thecarreaper F1 World Champ
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    geeze , so i work forever to buy a 25 year old beater 308 and now they may come and audit me and take it all away.............geeze. i have friends with bass boats that cost more that a 308 or a mondail. and they have to go buy huge full size 38k trucks to tow the toys with. crap.
     
  16. ralfabco

    ralfabco Two Time F1 World Champ
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    Yes but the truck can be fully written off as a business expense.
     
  17. thecarreaper

    thecarreaper F1 World Champ
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    since you said that and this is a tax/IRS thread, dont you have to get a business license and have a seperate place to operate ect ect ?????. i have been using a great CPA for the last few years and i am wanting to go the LLC route and get my " muscle car" business up and running. i have not had to have a license as of yet, but i am wondering how the hell you can write stuff off every year and not have a business and a license. it seems like it would be wrong and illegal to do so. i dont want to get the IRS pissed off at me, nor do i want to have to worry if / when i drop the hammer on a 308. my " regular" job as a jet mechanic pays pretty well and i am SINGLE! this tax stuff makes my head hurt, i dont understand most of it!!!!
     
  18. ralfabco

    ralfabco Two Time F1 World Champ
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    Ask your CPA.
     
  19. alanhenson

    alanhenson Formula 3

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    ssshhhh their watching us.
     
  20. Bill Sawyer

    Bill Sawyer Formula 3

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    I used to be a VP at an information services company that specializes in automotive work. We had an income model that took into consideration income, occupation, homeownership and auto ownership information to create a measurement of wealth that translated into an income figure. It was a well known fact around the office that the IRS had (many years ago) made inquiries about using the model to profile tax payers and determine whom to audit. The company refused to allow it.

    Not all states tax people on the value of their cars, so registration information is the way to go.
     
  21. Bill Sawyer

    Bill Sawyer Formula 3

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    The states don't have to do anything. There are private companies that have registration information that can run a list of Ferrari owners. Then all the Feds have to do is match it to the tax files.
     
  22. ART360

    ART360 Guest

    They've been doing that for a long time. They compare reported income, cross-reference it with cars owned, and if they don't match, audit time. Not just Ferraris, but all sorts of stuff, houses, boats, planes, etc. Been going on for at least 5 years to my knowledge. You get these stories about tax time each year. Thisyear, as well as last, they've been very busy on the war on terror, and the audits are down, so I hear.

    Art
     
  23. ralfabco

    ralfabco Two Time F1 World Champ
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    Grandma. Can I register my car in your name ?


    What about the land you have around Kalamath Falls ?
     
  24. donv

    donv Two Time F1 World Champ
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    If Grandma lives in Oregon, you should do that anyway (Oregon has very inexpensive registration fees and no personal property tax).

    However, to the question of how the IRS would get the registration information, Oregon, at least, makes it available on a CD that anyone can buy.

    OK, maybe you don't want to register it in Oregon ;-)

     
  25. F-passione

    F-passione Karting

    Mar 31, 2004
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    And, as a follow up......The IRS will be purusing F-chat so if you own a Ferrari and they see you on F-chat your in double trouble.
     
  26. Texas Forever

    Texas Forever Four Time F1 World Champ
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    Quick story from back in my revenuer days (which were a long time ago). The IRS got this bug up thier hinney that folks who drove Mercedes were tax cheats. So they dialed up the local tax records to give them the lising of all Mercedes owners. Only problem was that the data clerk thought that the IRS was asking for Mercurys, not Mercedes. Thus, the IRS ended up an audit list of people who owned Mercurys, not Mercedes. The punch line was that the IRS did catch a bunch of crooks, even if they drove Mercurys. I don't know if this was a true story, but it was making the rounds.

    Truth is that you have to get over being worried about being audited. If you haven't done anything wrong, an IRS audit is just a PIA.

    Oh, and yes, the IRS did try lifestyle audits a while back and caught a lot of flak over this. But, who knows, eh?

    Dr "I was just kidding about owning a Ferrari" Tax
     
  27. ryalex

    ryalex Two Time F1 World Champ
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    An Italian gentleman told me that if you live and Italy and buy even a used Ferrari you can expect to be audited soon.

    Never thought the IRS would be that devious though. Well, one would expect them to try...
     
  28. zsnnf

    zsnnf Formula 3

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    Sounds like more of the war on drugs program....
     

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