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Gold coin sellers angered by new tax law


#1

I don’t know if y’all allow posts of this type, but this article is
germane to those of us in the gold business.

Gold coin sellers angered by new tax law
By RICH BLAKE

Amendment Slipped Into Health Care Legislation Would Track, Tax Coin
and Bullion Transactions

Those already outraged by the president’s health care legislation
now have a new bone of contention – a scarcely noticed tack-on
provision to the law that puts gold coin buyers and sellers under
closer government scrutiny.

The issue is rising to the fore just as gold coin dealers are
attracting attention over sales tactics.

Section 9006 of the Patient Protection and Affordable Care Act will
amend the Internal Revenue Code to expand the scope of Form 1099.
Currently, 1099 forms are used to track and report the miscellaneous
income associated with services rendered by independent contractors
or self-employed individuals

Coin Dealers Flipping

Starting Jan. 1, 2012, Form 1099s will become a means of reporting
to the Internal Revenue Service the purchases of all goods and
services by small businesses and self-employed people that exceed
$600 during a calendar year. Precious metals such as coins and
bullion fall into this category and coin dealers have been among
those most rankled by the change.

This provision, intended to mine what the IRS deems a vast reservoir
of uncollected income tax, was included in the health care
legislation ostensibly as a way to pay for it. The tax code tweak is
expected to raise $17 billion over the next 10 years, according to
the Joint Committee on Taxation.

Taking an early and vociferous role in opposing the measure is the
precious metal and coin industry, according to Diane Piret, industry
affairs director for the Industry Council for Tangible Assets. The
ICTA, based in Severna Park, Md., is a trade association
representing an estimated 5,000 coin and bullion dealers in the
United States.

“Coin dealers not only buy for their inventory from other dealers,
but also with great frequency from the public,” Piret said. “Most
other types of businesses will have a limited number of suppliers
from which they buy their goods and products for resale.”

So every time a member of the public sells more than $600 worth of
gold to a dealer, Piret said, the transaction will have to be
reported to the government by the buyer.

Pat Heller, who owns Liberty Coin Service in Lansing, Mich., deals
with around 1,000 customers every week. Many are individuals looking
to protect wealth in an uncertain economy, he said, while others are
dealers like him.

With spot market prices for gold at nearly $1,200 an ounce, Heller
estimates that he’ll be filling out between 10,000 and 20,000 tax
forms per year after the new law takes effect.

“I’ll have to hire two full-time people just to track all this
stuff, which cuts into my profitability,” he said.

An issue that combines gold coins, the Obama health care law and the
IRS is bound to stir passions. Indeed, trading in gold coins and
bars has surged since the financial crisis unfolded and Obama took
office, metal dealers said.

The buying of actual gold, as opposed to futures or options tied to
the price of gold, has been a particularly popular trend among Tea
Party supporters and others who are fearful of Obama’s economic
policies, gold industry members such as Heller and Piret said.
Conservative/libertarian commentators, such as Fox News Channel’s
Glenn Beck, routinely tout precious metal on the air as being a
safe, shrewd investment in an environment in which the financial
system – and paper money backed by the rest of the world’s faith in
the U.S. government’s credit – is viewed as increasingly fragile.

The recently revealed investigation by California authorities into
consumer complaints against Goldline International, which has used
Beck as a pitchman, and Superior Gold Group (which has not) has put
a spotlight on what one liberal leaning politician, Rep. Anthony
Weiner, D-N.Y., calls the “unholy alliance” between gold coin
sellers, such as Goldline, and conservative talk personalities, such
as Beck.

Beck, who through his spokesman, Matt Hiltzik, declined to comment
for this story, and Goldline marketers portray gold coins as a
better alternative to owning bullion in the event that the U.S.
government ever decides, as it did under FDR in 1933, to make it
illegal for private citizens to own physical gold. At that time, the
U.S. dollar was still pegged to the price of gold; the gold standard
was abandoned during the Nixon administration.

Rep. Daniel Lungren, R-Calif., has introduced legislation to repeal
the section of the health care bill that would trigger the new tax
reporting requirement because he says it’s a burden on small
businesses.

“Large corporations have whole divisions to handle such transaction
paperwork but for a small business, which doesn’t have the manpower,
this is yet another brick on their back,” Lungren said in a
statement e-mailed to ABCNews.com. “Everyone agrees that small
businesses are job creators and the engine which drives the American
economy. I am dumfounded that this Administration is doing all it
can to make it more difficult for businesses to succeed rather than
doing all it can to help them grow.”

The ICTA’s Piret says identity theft is another concern because
criminals may set up shops specifically to extract personal
that would accompany the filing out of a 1099.

The office of the National Taxpayer Advocate, a citizen’s ombudsman
within the IRS, issued a report June 30 that said the new rule “may
present significant administrative challenges to taxpayers and the
IRS.”


#2

This new law really puzzles me. If a person takes gold scrap to the
refinery and asks for cash back, will this transaction be affected
by this law, or does it only affect sales of coin and bullion?

Also, does this mean that every time someone makes a purchase of
materials in excess of $600, to be used in the manufacture of their
product (in this case jewelry), the transaction will result in a 1099
form?

It is mind boggling to think of all the 1099 forms that will be
floating around every time someone orders something in excess of
$600.

Alma


#3
It is mind boggling to think of all the 1099 forms that will be
floating around every time someone orders something in excess of
$600. 

I don’t know, but you can bet they’ll persecute those who attempt to
get around the new laws with increments smaller than $600 as they
did with the bank laws regarding transactions of $10,000.


#4

Earnings, investments, real estate, food, medicine, clothing, death,
and now gold. Is there anything left that isn’t taxed? Maybe I should
shut up, breathing and the internet are about all that’s left, and
there’s surely a government entity looking into how to accomplish
that.

Ski


#5
Also, does this mean that every time someone makes a purchase of
materials in excess of $600, to be used in the manufacture of
theirproduct (in this case jewelry), the transaction will result
in a 1099 form? It is mind boggling to think of all the 1099 forms
that will be floating around every time someone orders something
in excess of $600. 

That is exactly what this law, as it stands now, means. 1099s have
historically been applicable to non-wage compensation and
services–independent contractors for example. As part of the recent
Health Care Reform bill, 1099s now will be required when one business
either buys or sells product in excess of $600.

In my case, for example, I will have to complete a 1099 for Otto
Frei, Hoover & Strong, Rio Grande, etc. If I purchase a new computer
from Apple Computer, Apple will receive a 1099 form from me. Going to
a show to buy? I will need to send 1099s to all vendors I buy $600+
from.

Any store, gallery, or other business who purchases $600+ from you
will have to send you a 1099.

Forgetting just the enormous amount of additional paperwork this is
going to be and the time and costs this will take to complete
properly, I find the exchange of taxpayer to be the most
disturbing. Think of all the businesses you will now have to share
your taxpayer with to enable them to properly complete
the 1099s. Think of all the others whose taxpayer you
will now be in possession of and charged with keeping secure so that
you can properly complete the required 1099s.

It is mind boggling.

Leslie


#6
In my case, for example, I will have to complete a 1099 for Otto
Frei, Hoover & Strong, Rio Grande, etc. If I purchase a new
computer from Apple Computer, Apple will receive a 1099 form from
me. Going to a show to buy? I will need to send 1099s to all
vendors I buy $600+ from. 

I did not read the law, so I am not arguing what it means, but if
the description is accurate - it will be a nightmare. If there are
accountants out there, could someone confirm the interpretation.

Leonid Surpin
www.studioarete.com


#7
did not read the law, so I am not arguing what it means, but if the
description is accurate - it will be a nightmare. If there are
accountants out there, could someone confirm the interpretation. 

There was an article recently in either the New York Times or the
Wall Street Journal. Hopefully the law will be repealed.

Elaine


#8
I did not read the law, so I am not arguing what it means, but if
the description is accurate - it will be a nightmare. If there are
accountants out there, could someone confirm the interpretation. 

Yes, Leonid, as a retired CPA, I can confirm this nightmare. The
current law (generalized) requires businesses to issue 1099’s to
unincorporated entities and self-employed individuals only. The new
law (2012) requires businesses (generalized) to issue 1099’s to to
incorporated and unincorporated businesses and individuals. The
reason that this provision is attached to the health care bill is
that Washington thinks that this will be a good way to help trap tax
cheats. Instead, it will create nightmares for honest americans, and
thousands of new IRS jobs. Tax cheats will find new ways to cheat.
Jamie

p.s. I predict that there will be attempts at modification of this
provision of the health care bill in Congress because of outrage on
the right and the left. Whether it gets passed depends on which side
can made the other look worse.


#9
Starting Jan. 1, 2012, Form 1099s will become a means of reporting
to the Internal Revenue Service the purchases of all goods and
services by small businesses and self-employed people that exceed
$600 during a calendar year. 

Fortunately, that portion of the law will almost certainly be
amended before 1/01/2012 to make it less onerous.

Lorraine


#10

I don’t see how this can possibly work, as you have to have the
social security number of the other party to file a 1099. Who’s going
to cough that up for a $600 purchase?


#11
I don't know, but you can bet they'll persecute those who attempt
to get around the new laws with increments smaller than $600 as
they did with the bank laws regarding transactions of $10,000. 

You better believe it the government will go after the little guys
and let tax cheats like Tim Geitner and the rest of the tax cheating
administration slide. This is about goverment control pure and
simple why else would they generate so much additional paperwork for
everyone…


#12

I wonder how many people will be making multiple $500-$599
purchases…


#13
It is mind boggling to think of all the 1099 forms that will be
floating around every time someone orders something in excess of
$600. 

Scary isn’t it. Think of all the increased overhead costs,
particularly with metals at the levels they are now.

How’s that hope and change working out for you?

Mike DeBurgh, GJG
Alliance, OH


#14
I don't see how this can possibly work, as you have to have the
social security number of the other party to file a 1099. Who's
going to cough that up for a $600 purchase? 

If the alternative is federal prison…

On another forum, a small business which is very important to
faceters said he is talking to his accountants and thinks he will be
forced out of business if this becomes law.

Al Balmer
Sun City, AZ


#15

per individual sale. That means that the little old lady that brings
in $15.00 of scrap gold each week will have to get a 1099. It also
means that you will have much more record keeping…Teddy


#16

If in order to be in compliance with the new law, one has to reveal
their social security number in order for the 1099s be be filed, then
we are opening the door to big problems with regard to identity
thefts.

There is absolutely no way that I am going to be handing out my
social security number to every person with whom I do business, nor
do I want to be in possession of and responsible for other people’s
social security number.

Just who was it on the health care reform committee that pushed
through this insane piece of legislation? Let us have some names so
that we know who is responsible for this batch of confusion.

Those of us who work with precious metals are facing a nightmare of
paperwork.

This new law is frightening and must be repealed. It will open a
Pandora’s box of chaos.

Alma


#17
I wonder how many people will be making multiple $500-$599
purchases... 

Oh, you don’t really believe they would have made it that easy, do
you? The $600 is cumulative, not a one-time expenditure number. So,
even if you make nineteen $20 purchases and one $21 dollar purchase
with the same vendor, a 1099 will have to be generated.

“Fortunately, that portion of the law will almost certainly be
amended before 1/01/2012 to make it less onerous.”

From your lips (or keyboard) to God’s ears, but you are much more
optimistic than I am. Even forgetting for a moment that all
government is loathe to eliminate paperwork and therefore eliminate
government jobs and forgetting that government has a grasping
insatiable appetite for on those it is supposed to serve,
there are several reasons why I am doubtful that this issue will be
dealt with in any meaningful way before it is implemented 1/01/2012.

  1. We are less than 100 days from a highly charged, extremely
    competitive national election. All seats of the House and one-third
    of the Senate is up for election. Many of the incumbents who are
    running are in competitive races for the first time in years. They
    aren’t thinking about spending time in Washington fixing their
    mistakes; they are thinking about being in their districts, raising
    money and campaigning.

  2. This particular change has been talked about for many years but
    the passage of the healthcare reform bill was the first opportunity
    that proponents of it saw a chance to get it passed unnoticed. The
    people who made the decision to put this change of 1099 filing
    requirements into a bill about healthcare are the people who are
    still in office and who are the leadership within both the
    legislative and executive branches. No matter what the election
    results are, they will still be in office through the end of the
    year. They wanted this change.

  3. Yes, this change in 1099 filing requirements is unpopular on both
    sides, but we have seen major legislation passed by Congress and
    signed by the President that was equally as unpopular with the
    electorate and was much more on the radar of the average American
    than this issue is. Unpopularity, strong sentiment against something
    from the electorate, low poll numbers of issues or those supporting
    those issues seem to have had little effect on those currently
    charged with representing us in Washington.

I am hopeful that this particular issue will be addressed and
rectified prior to implementation. However, I think that we all need
to do the work to plan for the worst if it is indeed implemented in
January.

Isn’t owning your own business fun?

Leslie


#18

Alma,

You hit a nerve insofar as mentioning the social Security number.
Last week a private student of Jay whaley, called with a personal
dilemma. She wanted to buy about 10 ounces of Sterlium Wire, and had
called Stuller. They told her that in order to order, she had to
provide them with her Social Security Number.

After she called me, I called Stuller to verify this odd position,
and they rather unceremoniously told me that The Patriot Act
required them to have that SS number on file. Pressing a bit, I
asked if we could make the purchase charging it to her card. They
told me that that would be a third party transaction and illegal.

I gave up on them, and now join those who say Stuller is not very
user friendly.

Not giving up very easily, I googled the Patriot Act to see just
where it said that. Not finding anything easily in that mishmash of
words, I called the Social Securithy Administration. Not much help
there, so I asked for a supervisor, and was hung up on.

I believe social Security Administration suggests that we not use
our number for identification, so will someone clarify this for me?
Just what is it, an ID number or a terrorist trace number?

When I relayed the to Jay’s student, her comment was,
“I’m buying Sterling Silver, not Plutonium!”

I think we are all in for a rough time. Also hidden in the new
Health Care Plan, is a tax on selling one’s personal residence, a
rather hefty one at that.

Terrie


#19
There is absolutely no way that I am going to be handing out my
social security number to every person with whom I do business,
nor do I want to be in possession of and responsible for other
people's social security number. 

For easy recordkeeping, I have a checking account and a credit card
in my company name. In order to get these accounts, the bank wanted a
Federal

Employer’s ID number. This number was also required in order to get
a business license in the state where I live. I need the business
license to buy wholesale and to pay state sales tax on the items I
sell.

This Federal I.D. number is like a social security number for your
business, and it is much less likely to be abused than your personal
social security number. This Federal Employer’s I.D. is the number
that is used when you issue a 1099, and when anyone asks for your
identification number so that they can issue a 1099 to you.

In order to generate 1099s at the end of the year, I would keep the
I.D.

numbers that I collected during the year, in the same way I keep my
cost for income tax purposes. Since the minimum effort required to
keep up with cost is to keep the invoices in a file, then it’s a
simple matter to keep the

Federal I.D. numbers written on the filed invoices.

When the new law becomes effective, vendors like Rio will probably
put their Federal I.D. number on their invoice. You may have to ask
smaller vendors to give you their number. The little old lady who
sells you scrap gold may only have a social security number, but she
will understand that she must give it to you if she wants to be paid.

The easiest way to obtain someone’s Federal I.D. number or social
security number is to ask for it when the seller is highly motivated
to close the sale.


#20
If in order to be in compliance with the new law, one has to
reveal their social security number in order for the 1099s be be
filed, then we are opening the door to big problems with regard to
identity thefts There is absolutely no way that I am going to be
handing out my social security number to every person with whom I
do business, nor do I want to be in possession of and responsible
for other people's social security number. 

For easy recordkeeping, I have a checking account and a credit card
in my company name. In order to get these accounts, the bank wanted a
Federal Employer’s ID number. This number was also required in order
to get a business license in the state where I live. I need the
business license to buy wholesale and to pay state sales tax on the
items I sell.

This Federal I.D. number is like a social security number for your
business, and it is much less likely to be abused than your personal
social security number. This Federal Employer’s I.D. is the number
that is used when you issue a 1099, and when anyone asks for your
identification number so that they can issue a 1099 to you.

In order to generate 1099s at the end of the year, I would keep the
I.D. numbers that I collected during the year, in the same way I keep
my cost for income tax purposes. Since the minimum effort required to
keep up with cost is to keep the invoices in a file, then it’s a
simple matter to keep the Federal I.D. numbers written on the filed
invoices.

When the new law becomes effective, vendors like Rio will probably
put their Federal I.D. number on their invoice. You may have to ask
smaller vendors to give you their number. The little old lady who
sells you scrap gold may only have a social security number, but she
will understand that she must give it to you if she wants to be paid.

The easiest way to obtain someone’s Federal I.D. number or social
security number is to ask for it when the seller is highly motivated
to close the sale.