Do Gold Buyers Report to the IRS?
Many individuals believe precious metals to be exempt from reporting requirements; this is not true; gold coins are considered collectibles and should be reported when sold, with any gains taxed at 28% capital gains rates.
Precious metal dealers must report cash transactions exceeding $10,000 paid with cash; however, there are exceptions to this rule.
Most precious metals dealers don’t disclose customer transaction details to the IRS due to investor preference; however, in certain circumstances these dealers are legally obliged to report such as when customers sell large quantities of bullion pieces and pay more than $10,000 cash.
Capital gains on precious metals are taxed as ordinary income and subject to a 28 percent cap. Your liability depends on your cost basis – calculated by subtracting the purchase price from the sale price – plus additional expenses such as appraisal costs that may apply (i.e. costs associated with appraisal).
Gold can be an extremely safe and secure asset; however, owning it comes with additional costs that could significantly decrease after-tax returns. Therefore, it’s essential that all associated costs and fees for owning precious metals be carefully considered prior to investing in them.
The federal government regulates which precious metal sales must be reported and requires dealers to follow stringent reporting guidelines when reporting these transactions. These reporting rules are determined by US laws designed to combat money laundering schemes and require dealers to report significant cash payments for precious metal purchases – though not bars or rounds as such as Krugerrand Coins, Maple Leaf Coins or Mexican Onza Coins fall within their purview.
These laws are grounded on the assumption that the Treasury is concerned about large volumes of bullion being traded on commodity exchanges; however, these rules only apply to cash purchases (not wire transfers, money orders or personal checks used to purchase precious metals) making this more of a surveillance tool than an attempt to regulate the market.
Many precious metals investors may be lured in by claims that there is an easy way to avoid taxes when selling gold bullion, but such claims are typically inaccurate. The IRS makes it very clear that precious metal dealers must report any sale that involves significant cash payments as “reportable sales”, using Form 1099-B or 8300 as soon as they occur.
These forms allow the IRS to detect instances of tax evasion by individuals who sell items as sources of income. While the government generally doesn’t care how much gold you buy or sell, they do want to know if any substantial profits come from your transactions.
Coins have their own reporting requirements that differ from gold bars. Purchases made using cash of $10,000 or more must be reported using Form 8300; this applies to purchases paid for with money orders, traveler’s checks or bank wires.
Many investors understand the laws and rules surrounding their purchases of precious metals, yet are reluctant to have their transactions reported to Uncle Sam. Unscrupulous dealers use this fear factor as leverage against unsuspecting customers by increasing prices for coins they sell.
The law and its reporting requirements are intended to combat money laundering and other suspicious activity. Dealers must report any payments exceeding certain thresholds; these thresholds depend on factors like type, volume and duration.
Paying cash for a gold coin worth $12,000 triggers a reportable transaction; however, paying $8,000 cash does not necessitate reporting. Furthermore, selling COMEX 1000-ounce silver bars directly to dealers would necessitate reporting requirements, while selling several 100 ounce silver bars wouldn’t.