Precious metal investments offer investors passive income generation; that is, profits are generated solely based on market movements without requiring further work from them. Therefore, under IRS policy precious metal dealers are required to report certain transaction payments exceeding $10,000 that exceed $10K in total transaction payments.
Avoiding reporting requirements is impossible; any dealer promoting any strategy or loophole to bypass them should raise red flags immediately.
What is a reportable transaction?
Gold investment offers many people a sound way of protecting their wealth against rising inflation, geopolitical risks and recession. Unfortunately, many precious metal investors may not know that if they purchase gold coins and make significant profits through selling, the IRS requires them to report those earnings using Form 8300.
The Form 8300 requirement is determined by Treasury regulations, which define cash as any payment of $10,000 or more made directly in cash (this includes traveler’s checks, money orders and cashier’s checks) to a gold dealer. To prevent money laundering or tax evasion this rule does not apply when made through personal checks, ACH transfers or credit/debit cards as these payments are considered paper currency – though an exception to this may exist when purchasing American Eagles.
What are the guidelines for reporting a reportable transaction?
Gold and silver sellers must report any capital gains realized when selling precious metals, usually through receiving either a Form 1099-MISC, 1099-NEC or 1099-B depending on what was sold and who handled its sale.
Reporting requirements vary for dealers; typically this could involve receiving large cash payments or conducting multiple transactions quickly in short periods. Dealers are also required to submit Form 8300 when accepting over $10,000 cash payments (money orders and cashier’s checks) as payment for bullion sales transactions.
Unscrupulous dealers may use the threat of reporting to intimidate investors into purchasing overpriced coins. To mitigate their exposure and protect themselves from this possibility, investors looking for peace of mind should purchase American Eagle coins which do not trigger cash reporting thresholds or consider investing in gold streaming or royalty companies like Wheaton Precious Metals or Franco-Nevada.
How do I know if I’m required to report a reportable transaction?
IRS does not mandate precious metal dealers withhold taxes when selling any precious metal products, due to its view that precious metals are more collectibles than investments. Investors should remember, however, that any profits gained by selling gold coins or bullion bars within one year (known as short-term capital gains taxation) may be taxed accordingly.
When purchasing multiple quantities of silver products from US dealers over specific quantity thresholds, these transactions must be reported using Form 1099B. This applies to American Silver Eagles, privately minted Silver Eagles and 100-oz silver bars.
Additionally, any time you sell precious metals to a dealer in the US using cash as payment, they must also be reported on a 1099B form. This applies even if you only make one coin or bullion bar purchase; thus it is essential that all rules and regulations regarding Precious Metal sales be understood prior to making purchases.
How can I avoid reporting a reportable transaction?
Though not prohibited by the IRS, dealers who accept significant cash payments in selling bullion must report transactions that exceed $10,000 value to help prevent money laundering and other illegal activity that might damage our national economy.
Although no limit exists for how much gold can be purchased without being reported, when sold all precious metal coins and bars become taxable. Your taxable gain can be calculated by taking the total sales price minus your cost basis – whatever remains is your taxable gain.
ICTA has released guidelines regarding which precious metals must be reported to the IRS based on conversations they had with this agency, but these rules should only be seen as guidelines and may change without warning; always consult a tax professional for specific advice regarding your situation. Also keep in mind that all sales of bullion product regardless of whether private or reported are subject to capital gains taxes at both state and federal levels – for further assistance please speak to a professional in tax matters.