Related finance companies have been around for a long time…and so have the IRS guidelines for valid RFCs that auto dealerships must follow for tax compliance. With increased IRS scrutiny of the relationship between auto dealerships and these finance arms, however, owners and managers need to take a closer look at entity relationships, operational processes and reporting to avoid additional taxes and stiff penalties down the road. We review the pros and cons of RFCs, key areas for ongoing risk management and allowable methods for supporting cash flow and tax deductions.
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