Do Precious Metals Sellers Report to the IRS?
Under current Anti-Money Laundering laws, precious metals dealers are legally required to report certain sales of precious metals and coins to the IRS, such as when customers sell large quantities or pay over $10k cash for purchases.
Investors should understand their reporting obligations to avoid being taken advantage of by unscrupulous dealers who prey upon fearful investors for profit. In this article we’ll look at whether and when precious metal purchases must be reported to the IRS including taxes and limits.
What is a reportable transaction?
When selling gold and silver bullion to a dealer, it’s essential that you understand which sales must be reported to the Internal Revenue Service (IRS). If your transaction falls into this category, they must file IRS Form 1099-B with the federal government as soon as possible.
Reportable transactions involve any sale of physical precious metals for cash payment of $10k or more, including coins, bars and bullion.
As well as filing the 1099-B with the federal government, dealers are also required to file Form 8300 with them in order to report large or suspicious transactions that could be linked with money laundering activities.
To complete and submit a Form 8300, the dealer must identify any notice, revenue ruling, regulation, announcement, or other published guidance that has identified their transaction as reportable and describe steps taken to meet any conditions contained within such guidance.
What is a cash reporting transaction?
The Internal Revenue Service has regulations and rules in place regarding gold sales that must be reported. Typically, precious metal dealers must notify the IRS when customers purchase large quantities of certain bullion pieces or pay over $10,000 cash. This does not include personal checks, bank drafts, cashier’s checks or traveler’s checks with face values of more than $10,000 as this would fall outside these rules and regulations.
Precious metals like gold coins and bars are considered capital assets by the IRS, with any financial gain from their sale considered taxable income. Capital gains taxed at up to 28 percent federal rate as well as state taxes may apply; investors are strongly advised to consult a tax professional when selling gold and silver, in order to accurately ascertain their total tax obligations.
What is a reportable sale?
Many precious metals customers prefer not to report their gold purchases to the federal government, even though owning and selling such metals are entirely legal activities. Under anti-money laundering regulations, specific transactions must be reported.
Precious metals dealers must report sales when they receive more than $10,000 in cash during a single transaction – referred to as a “cash reporting transaction.” This requirement does not apply to purchases made using personal checks, wire transfers or money market withdrawals; rather, only cash – greenbacks and paper currency – needs be reported.
An average scenario would involve a customer visiting a coin shop and purchasing $8,000 worth of gold coins with cash (paper money). Subsequently, this same buyer returns within hours to purchase another $5,000 in gold coins using cash (paper money). If the dealer received more than $10,000 in cash during this transaction, an IRS Form 8300 must be completed to report this sale and file reports of such sales with IRS.
What is a non-reportable sale?
Investors frequently buy precious metals as a hedge against inflation, geopolitical risks and economic slowdown, yet it’s essential that they understand the potential tax liabilities when selling. In the US, precious metal dealers are legally required to report sales that involve large quantities of certain bullion pieces or payments exceeding $10k USD in cash to the IRS.
In both instances, dealers must issue you an IRS Form 1099-B with your relevant tax information as the IRS treats precious metals like gold as collectibles subject to a maximum rate of 28 percent taxation.