When purchasing precious metals, many consumers worry that their purchases will be tracked by the government. While this answer is ultimately no, further explanation may be required.
Payment terms will determine whether or not a dealer must report their sale to the IRS, so in this article we’ll explore reporting requirements for gold buyers.
What is a Reportable Transaction?
Gold dealers must file reports to the IRS detailing sales of certain bullion precious metal products to customers via Form 1099-B of the 1099 series, specifically when selling 1 oz South African Krugerrands or Canadian Maple Leaf coins; Mexican Gold Onzas (1 oz); or any US coin made up of 90% silver.
Not all transactions require reportage to the IRS; any attempt at structuring purchases so as to evade IRS reporting can constitute illegal money laundering activity and lead to violations.
Example: If you purchase gold coins with cash of $8,000 from a coin shop and pay $800 cashier’s check the following day, this transaction must be reported to the IRS. When it comes to filing precious metals taxes it is crucial that you work with a knowledgeable tax professional.
How is a Reportable Transaction Determined?
With tax avoidance schemes on the rise, Congress has passed laws mandating disclosure of certain suspicious transactions. These “reportable transactions” fall under five categories – confidential transaction, contract with contractual protections in place, loss transaction and transactions of interest. Any individual or entity participating in such an exchange is required to file Form 8886 within 72 hours; failure to do so can incur severe penalties.
The form requires taxpayers to identify any transactions in which they participated and to give an explanation for why. All those benefiting from a transaction, as well as advisors or promoters that have direct ties to taxpayers, must disclose their participation.
Even if a transaction does not meet the threshold for being reported, the IRS can still assess a penalty under Section 6707A for failing to file Form 8886 on time. Therefore, taxpayers are strongly advised to consult a tax advisor prior to engaging in transactions that might potentially constitute reportable transactions.
How is a Reportable Transaction Filled Out?
People invest in gold as an effective hedge against economic turmoil, but selling their jewelry, coins or bars to raise cash when times become tight can also be profitable. Gold buyers have seen an increase in customers looking to cash in on their assets such as jewelry, coins and bullion bars.
Gold sellers must carefully consider the buyer before selling. They should check reviews and complaints to make sure that they are dealing with an honest company and consider the total quantity they are selling them.
Online gold buyers offer an easy and straightforward process for anyone wanting to sell their items of gold. Once your gold items arrive at their facility, the buyers will evaluate it and provide you with a price. Payment may then come through direct deposit or check.
What Happens if a Reportable Transaction is Not Filled Out?
Some individuals may be confused about the government’s reporting requirements for gold purchases. While most bullion coins and bars do not require reporting to the IRS, certain transactions involving substantial cash payments or multiple purchases totalling over $10,000 do require reporting via Form 8300 by their dealer. In these instances, reporting must take place under penalty of law by filling out form 8300 as soon as possible.
Though most people understand owning precious metals is legal, some remain wary about having their transaction data recorded by the government. While this makes sense as many may not trust what will become of their data in future, some choose products subject to reporting requirements rather than buying and selling precious metals without disclosing all details to government officials. But don’t despair: there are plenty of ways you can still buy and sell precious metals without disclosing transaction details to them!
