Wiley: How Dealers Made The Most Of 2014 Tax Season
The peak of tax season is over. W-2 forms have been handed out to employees, and the tax refund money is long gone in most cases.
If your business was ready for tax season, the annual opportunity was once again available to cash in. Tens of thousands of cars were moved from October to January in anticipation of the customer’s tax refund jackpot. Thousands more vehicles were moved during the W-2 season of late January and early February.
Planning and preparation can have multiple benefits during the tax season and lead you to the same success. Forward-looking businesses have the opportunity to work with customers and lenders, create a marketing and inventory strategy, and work with an experienced tax refund partner for a much smoother ride.
When you have a plan your team executes, and your strategy is solid, the result can be half of your annual business or more in the first two months of the year.
Tax Season Best Practices
First, know your stuff. Proprietors who look forward to tax season financially also look forward to tax season with a strategy. Research shows that dealers who approach tax time in September and formulate a plan in the late weeks of summer do not simply make more dollars than their competition — they double and triple their neighbors in terms of dollars and traffic.
Now more than ever, tax time starts with Halloween and Thanksgiving with less risk. Dealers move the exact same cars they would normally move, except the customer makes a bonus payment at tax time.
Example: You want $1,500 down and the customer only has $1,000. Most lots will do that deal by extending the payment structure, increasing the weekly payments, or both. But the reality is that you can commit the customer to a second $1,000 payment out of their tax refund come February.
Instead of $1,500 down, you can end up with $2,000 down or more with a little salesmanship.
Where is your risk? No more than any other deal that you come across. Actually, the risk is less than normal. If the customer does not bring back that second payment of $1,000 in February, you are in the same position as any other deal.
Here is the catch. Most tax refunds are Monopoly Money. When children are involved, the average tax refund was more than $5,300 in 2013.Help the customer help themselves when that money arrives in February. Get a bonus payment.
So what if the customer fails to bring you that $1,000 bonus payment? Nothing. You sold the car in November, just like normal.
The final point to remember is that this second payment does not need to be labeled a pickup payment.It is in reality, an optional payment.
What would you normally do if your customer were the recipient of an $8,000 tax refund and wanted to use a piece of it to pay down their car loan to save some money? Nothing. You accept The payment and apply it to the loan. It is nothing but additional cash-flow.
What Happened In 2014?
The fact is that 2014 may have been the smoothest tax season in many years. No IRS computer breakdowns. No fiscal cliff issues. No last minute IRS tax law changes. No significant delays for education credits, itemized deductions or any other specialty forms.
The most significant complaint from taxpayers this year was due to budget cuts with the IRS.Less help was available on the IRS 1-800 lines to help with questions. This is where having a tax partner for your customers can provide you the greatest benefit.
Customers who are directed to tax professional can get paid much faster than taxpayers who file on their own. Fewer mistakes lead to faster tax refunds and fewer regrets.
One new feature was the Identity Protection PIN. This was a six digit code that was required for some taxpayers who had been prior victims of identity theft. The PIN was mailed to the customer in December and was needed to file the tax return at the beginning of the year.
A hold-over from 2013 was the IRS opening date. The traditional kickoff has been the weekend of Jan. 15th. Last year, in 2013, the IRS decided to open later on Jan. 30.
This did tend to ruffle a few feathers for customers who want their tax money yesterday, but it worked out for the best. Tax fraud was down. The illegal claiming of children was down. IRS computer issues were reduced, as well.
So in 2014, it was no surprise to those of us here in the tax industry that the IRS opened at the end of January once again. The negative backlash from the public was almost non-existent.
Obamacare was a non-issue for 2014, as well.The new requirements for customers will start next year. The good news is that most of the burden will be on the professional tax software companies that calculate the tax returns and the people who try to prepare their own tax returns. Customers who use a trusted and reputable tax professional will fare better than most.
The new Obamacare requirements may end up as a blessing in disguise. More dealerships are inviting customers to file taxes with a preferred tax professional that can funnel the tax refund money directly to the dealership. This makes it easier to get paid out of the refund proceeds.
The anticipation is that next year, more customers will be on the lookout for professional assistance.This can create an unprecedented opportunity for dealers in the Special Finance market to monetize the tax refund season in ways they have never seen before.
2014 was another record tax season, but with the proper strategy and planning, 2015 could be huge.
Chip Wiley is the corporate trainer and marketing specialist for Tax Refund Services and Tax Max. Wiley can be reached at (813) 987-2199 or firstname.lastname@example.org.