Government Tax Regulations for Buying & Selling Gold Coins
Selling gold became a popular trend, especially with the rise of gold since the middle of this century's first decade. When buying or selling gold, the IRS wants to know of any profit. A little known facet of the Patient Protection and Affordable Care Act will affect the way profits on gold coin sales must be reported, barring any changes from Congress.
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New Law
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Prior to the Patient Protection and Affordable Care Act, signed into law in March 2010, 1099s were used to report unearned income like payments to contractors and interest and dividends.The act now also requires dealers to report transactions of goods and services that exceed $600 by using Form 1099. The requirement goes into effect as of January 1, 2012. Gold, considered a precious metal, falls under this category. The Joint Committee on Taxation, as reported by ABC News, estimates the new reporting requirements will allow the government to collect $17 billion in previously uncollected taxes over 10 years.
Effect on Brokers
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Under new rules, a broker -- someone who acts as an intermediary between a buyer and seller -- must report sales of 25 coins or more on form 1099-B. As with other 1099s, this form that reports barter and broker exchanges, is filed with the IRS and sent to the seller. This Commodity Futures Trading Commission minimum reporting requirement applies only to 25 or more coins sold in a single transaction, not 25 coins sold separately over the course of a year
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Effect on Taxpayer
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Gold coins are considered a capital asset -- something that cannot be converted quickly into cash. Any gain or loss gold sustained during a sale is considered to be a capital gain or loss. The taxpayer must report the proceeds noted on the 1099-B as a capital gain on his annual tax filing.
Dealer Backlash
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As opposed to other businesses that may deal with a limited number of vendors, gold dealers often buy from individuals. One dealer interviewed for ABC News in July 2010, estimated that he dealt with some 1000 customers every week. Because they deal in so many separate transactions, some gold coin dealers have been outraged by this new change in law and are hopeful this provision of the act can be repealed before implementation in 2012. A gold coin dealer also commented in the same article that the extra reporting requirements will force him to hire more staff just to deal with the paperwork required by the IRS.
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References
- Photo Credit gold coins image by Roman Sigaev from Fotolia.com
