First off, please realize that I know almost nothing about accounting. Or taxes. I get boxes of coins from one bank and use the automatic coin counters at another bank to convert them back into paper money. The funds never really stay in my account. An accountant friend of mine warned me that, somehow unbeknownst to me, this could set off some sort of "flag" to the powers-that-be (gov't, IRS, etc.). Something about calling it "income" if I can't prove where I got it (?). Now, I can't see it, but as I said, I know about other things, but taxes is definitely not one of them. Can anyone shed any light on this one way or the other? Preferably someone with a financial/accounting background? If it is sheer *volume* that can trigger a red flag, then say that as well. Thanks.
What your friend is getting at is how do you prove to the IRS this money being deposited is money you already paid taxes on? I understand you say you are just churning it, trading cash for coins and vice versa. However, to the IRS this could look like you depositing a lot of money that you made and haven't paid taxes on. Also, to law enforcement, it could look like you are trying to launder money, to hide the fact it was from illegal activities. I do not think either are true for you, but they could be concerns. As protection, make sure you document when you take money out as well as deposit, as well as document any coins you find from roll searching.
Thanks. So basically get receipts whenever possible, right? And how exactly does one document coins found from roll searching? Is simply writing it down sufficient?
To that I would say you call a dime a dime or a quarter a quarter ect. Who's business is it really if you find coins worth more than face roll hunting as you pay face value on them. Of course Uncle Sam always like his peice, but who says he needs to know anything. You're not doing anything illegal.
First, most do not dump them back into the same bank they got the coins, it ticks the banks off. Second, any kind of withdraws and deposits do not "prove" its the same money, this is how money laundering is accomplished. Its a simplistic method sure, but a method. OP, I never meant to say you have a high probability of being accused of either thing, just explaining what your accountant friend meant. If you show how you are searching change for rare varieties, and have some you can show them, that would help is ever accused is all.
A quarter is only worth a quarter... even if it's silver... until you sell it. And I would be extremely surprised to find anyone laundering coins! LOL If you want to be super careful, you could keep track of each "keeper" you find, and note that the cost basis (what you paid for it) is simply face value.
It wouldn't hurt to print and save some of your CT posts about your CRH'ing activities. While they may not help you with the curmodgeon having a chip on his shoulder and a hair across his arse, they will likely lend your claims plenty of credibility, and turn many doubters into believers.
Banks only report transactions to the IRS that are over a certain amount. Last I knew it was 10K. If you get audited for some other reason, everything comes into question. Just keep good records if you are moving large sums of money and you will be just fine.
I save all my invoices, just in case. I don't think I have total sales over 10k in a year (not really a dealer, just get rid of extras, etc) but if they try to nail me, well, I used the money and just purchased more. At least, I *think* that's how it works. I know you can reinvest stocks without having to file capital gains. Unless we are talking thousands, or like... over 10K I don't think they will notice, or care. I wonder how they track sales with Paypal these days. I've never been questioned, just filed my W2's.
I believe if you make more than $600, then you are required to account for that in your taxes. With stocks it may be different, but I think the IRS wouldn't consider a private business built upon CRHing as "stocks". That being said, OP, I don't think you have anything to worry about. There are so many people doing this now that I think the IRS has realized it and there's no need to keep records for anyone other than yourself. Personally, I do it just because I like to see what I've found in a box.
I don't think that's the case. Yes, most people don't pick up and dump at the same branch, but they generally do use the same institution. And even if they don't, 99.9% of companies today so direct deposit. Even if they don't, their records would still show that they wrote a check to you. The only reason I think OP would ever get audited was if he worked cash only jobs, in which case he wouldn't get audited if he was honest on his initial tax forms. If OP does make a large profit from selling coins he CRHed, then that is a different case. I'm pretty sure federal limit on income in a year is that if you make over $600 you're obligated to divulge that on a tax form. But I think that they have way bigger fish to fry than auditing ebay sellers.
I just haven't cared enough to read up on it. I don't see how it can be considered a sale if a.) you didn't make that much given the purchase price and b.) you turn around and use the money for another purchase. That said, I'm rambling and a sale is a sale. I thought there was a law for stocks at least for reinvesting (I don't men dividends but actually selling the stock and purchasing more). I could be wrong. If they want to nit-pick at .0001% of my taxes I'll be sure to read up on it and take up enough of their time, their net loss on support will satisfy my vindictive side >;3 That said, it's not like you can't walk into a coin show and walk out with cash.
If you sell stock for a profit and use the proceeds to buy stock in a DIFFERENT company, you would still owe the taxes on the proceeds. If you sell stock for a loss and within 30 days before or after (60-day window) buy stock in the SAME company (convertible preferred shares MAY be considered similar enough to common stock, thereby triggering the rule, in certain cases) or options on the stock, you would trigger a wash-sale. You can't claim the loss, but would instead be allowed to increase your basis in the stock by the amount of the loss. The only time the IRS allows for you to sell something and buy something else without triggering a taxable event is with certain real estate purchases. However, the reality of this is that it's really a law in place to help realtors pad their pockets.
Yeah you're right. It's all coming back... ;3 I'm not a dealer though, I'm a collector so don't really care. It's just the Paypal accounts they might nail me if that even throws me into a higher bracket. I doubt they will; it's just not enough.
Man, lots of tax geek talk here. First, I was just saying to document any CRH finds to prove why you are taking money in and out, to prove that money was already taxed. Second, ANY profit legally is supposed to be reported on your taxes. The $600 de minimus only applies to having to report it on a 1099. If you make a $30 profit on something, the information reporting person does not need to report it, but you have to claim it. Third, NorthKorea is right in post #16 save for one small thing. Like-kind exchanges are allowable for many types of assets, provided its the same type of asset and you identify the new asset you will buy before you sell the old one. An example could be you arrange to buy one apartment building before you sell your old one. If done properly you can roll the basis of your old building into the new one. That is just a real estate example, but can be done with other types of assets like equipment, but it is most commonly done with real estate. It is, though, prohibited to be used on financial assets.
