Taxation on coin sales

I think the advise given to consult your accountant would be wise. Depending on where you live, some states don't tax the sale on coins, but do tax the gains on them. Don't know how it works and don't care, because I'm not in it to make a dime, but it might be worth the time to seek experienced information by a professional.
Guy~

 

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Okay, I looked at the IRS website, but the description of the type of questions accepted at the phone number I found did not seem to apply. It looks like the easiest thing to do will be visit my local IRS office.

I find it hard to believe that no one on this forum has the personal experience of selling any coins, and can tell me how they reported the income/capital gain/or whatever you called it.

My intention is not to make income for the purpose of living, only to make a few extra dollars to collect coins with - as I am fairly low income. If I could make a few dollars buying and selling coins, I could use it to fund my hobby of collecting.

My income taxes are simple so far and I don't need an accountant. I don't want to get in a situation where I need an accountant to figure out how to report increases in the size of my coin collection. If it's that hard, I'd just as soon not do it at all.

I want to do this accurately, even if it means paying more tax than I would need to if I claimed it in a different way. I just want the simplest way to report this. I'm not worried about paying taxes, etc.

 

I created an LLC for my hotsauce website and ebay sales, and am in process for the coin thing.

Each situation is different, I was advised LLC by my taxman/accountant

 

How much does it cost to get an accountant to do your taxes with the capital gains thing? I'm not sure if it will be worth it for me. Whatever gain I have will probably be to small to even cover the cost of the accountant.

 

He did not say to have an accountant DO your taxes, just advise you on WHAT to do......it's fairly simple itself

 

Our business just got a CPA to start to do all of our work. He was a client so now we are a client of his as well. I would strongly suggest that you go and at least talk with one about what you are doing and see what needs to be done and if you can considder it a hobby. I do that for one of my side jobs I do---so far it has worked out pretty well.

Speedy

 

"I find it hard to believe that no one on this forum has the personal experience of selling any coins, and can tell me how they reported the income/capital gain/or whatever you called it. "

As administrator said and others, according to the IRS you must report as a taxable event EVERY capital gain. Period. This is very simple. If you buy a coin for X and sell it for X+Y, it is a capital gain. If you held the coin for less than a year, it is a Short Term Capital Gain and taxed as ordinary income. If you held the coin for over a year, it is a Long Term Capital Gain and taxed at YOUR appropriate LTCG rate. For most folks, this is 15%, but for some lower income groups, it is as low as 5%.

Capital gains/losses are reported on Schedule D. However, to make your life much simpler, I would highly recommend that you buy either TurboTax or TaxCut software. Each and every transaction is a potential capital gain/loss and therefore a taxable event.

These same rules apply to the sale of ANY ASSET.

"My intention is not to make income for the purpose of living, only to make a few extra dollars to collect coins with - as I am fairly low income. If I could make a few dollars buying and selling coins, I could use it to fund my hobby of collecting. "

The IRS doesn't care one iota what your intention is. All they care about is if you had a taxable event that you need to report and pay taxes upon.

"My income taxes are simple so far and I don't need an accountant. I don't want to get in a situation where I need an accountant to figure out how to report increases in the size of my coin collection. If it's that hard, I'd just as soon not do it at all. "

Frankly, I'd still buy a copy of TurboTax and for the first year, go easy and see how it works ouit.

"I want to do this accurately, even if it means paying more tax than I would need to if I claimed it in a different way. I just want the simplest way to report this. I'm not worried about paying taxes, etc.[/quote]"

good luck,

rono

 

Even if I sold an item for a penny?

 

have you read the items on this webpage?

http://www.irs.gov/businesses/small/article/0,,id=99336,00.html

-Steve

 

Keep track of every thing you purchase and everything you sell. Get all the receipts you can get. Also keep all the receipts. You can also deduct expenses that you had like the $15 for your web site. At the end of the year you can file a Schedule E. Turbo Tax can walk you through it but you will have to pay tax on all earnings.

 

Technically, yes.

Where most often folks find some relief is that the IRS allows us to sell items that we've owned over time in a garage sale type of process and not report.

However, that's an exemption to the rule and the rule is very explicit - if you sell an asset for more than you paid, it is a capital gain and taxable.

rono

 

"Technically", you're right, but how many people REALLY claim capital gains on what they sell? I understand what this guy is doing may be different since he's going to be close to an internet business, but probably without an employer ID #. You know there's millions of people out there that bought an old car or an old mower, fixed it up, turned around and re-sold it for cash and it was never claimed.

I bet the people that don't report gains compared to those who do in this country are at least 100 to 1, if not many more.

I usually take a beating on everything I sell so it's never mattered to me. I'm not advocating trying to skate the system but I think some people here are giving a government agency WAY too much credit. I guess it depends on what you're doing.
To think they're able to micro-manage beyond the W-2s and 1099s that are sent to them by employers and banks I think is really a stretch. Besides the fact you have about a 1% chance of being audited if you make over 200,000 a year. They focus much more of their attention on the wealthy, because it may turn out to be actually worth their time!

For how much the OP is worried about this, I'm thinking anonymously paying your ebay sellers fees is starting to look better all the time. At least for the initial practice to see how you do. If you just want to do it for a hobby, you'd probably be safer and better off without your own website.

 

this is a question for a cpa

 

So if I sell a penny for a penny, that has to be reported?

 

I'm not a CPA, yet, but I am a senior college student studying accounting... so can give you a somewhat qualified opinion (however I still suggest you consult a CPA for the particulars; I'm reasonably confident I'm correct but I take no reasosibility for any trouble you have with the IRS should you act on my advice and it turn out to be wrong!)

You only need to pay self-employment tax if you are in fact, self-employed. May sound obvious... but what that means is you have to have some sort of registered business or be a self-employed contracter to be considered self-employed. Any income you make from self-employment, less expenses, is subject to both normal taxes at your marginal rate and self-employment tax (basically, you're paying the social security taxes that an employer would have paid half of, were you employed by someone else). There is a threshold for this... if your self-employment income times 0.9235 equals less than $400, you don't have to pay any SE tax on it (though it's still subject to normal income tax at your marginal rate).

If you're not really self-employed... if the income you earn is really just from a hobby, it's miscillaneous hobby income. It's taxed at your marginal rate, but not subject to SE tax.

Usually the dividing line between a hobby that happens to produce income and self-employment has to do with the relative volume of income it produces in proportion to your total income. Check with a CPA to figure out whether your earn enough income from it to be considered self-employment or not.

Other difference between a hobby or a business, is a business can claim a net loss (for up to 7 consecutive years; past that point it's reasonable to expect you'll close up shop rather than contimue to operate an unprofitable business, therefore the IRS quits letting you claim a loss for that business past that point). You can deduct hobby expenses from hobby income, but at best you can only break even; even if your hobby expenses exceed your hobby income, you can not claim a net hobby loss.

There may be certain times where the sale of a coin for a profit can be considered a capital gain (or a loss, if sold at a loss). It depends on the nature of the sale and the item... again check with a CPA on this if you have any questions about it...

It's also theoretically possible, if you use the profit from coin sales just to buy more coins, that it can be considered a like-kind exchange, allowing you to defer the realization (and thus the tax) on the gain.

If the gains you make are relatively insignificant the IRS may just consider ot below the level of administrative convenience (like when they don't bother to tax free coffee your employer provides as income).

If I havent' said it enough, if you have enough income from coin sales to be reasonably concerned about the tax consequences, consult a CPA (especially one that specializes in taxes) before you file your tax return. This info is a guideline only and what you're required to claim on your taxes can differ greatly depending on your individual situation.

 

If you paid a penny for it, and sold it for a penny, no. Your gain is nothing.

If you got it for free, that's technically $0.01 profit. Doubt the IRS cares. Now if you found 100 million pennies for free and sold them at a penny each then I think you better report it lol...

 

Howdy,

Let me repeat.

If you sell an asset for MORE than you paid, the IRS considers this to be a capital gain and therefore a taxable event. This is there basic rule of life. It's not mine - it's theirs. I'm just trying to tell you where they're coming from on issues like this. Any capital gain whatsoever is going to be technically a taxable event if you ask them. Whether they want to be bothered with you reporting it - is another.

Now that we know what their baseline is, they grudgingly allow us common people a little slack in a couple of ways.

They exempt what they refer to as 'garage sale' type stuff. This exemption applies to capital gains, sales tax, etc. Not because they want to let us off the hook, mind you, but only because the paper work to them outweighs the take.

This is also why they round numbers off to the nearest dollar. Again, not because they don't want the tax on your $0.04 cent profit on that penny you found in change and sold for a nickel . . . of COURSE they want it. They just don't have time to bother with it. Now if you did this 10,000 times you'd better be ponying up.

And frankly, for the vast majority of us collectors this is all a moot point as I'd guess that most of us don't report occasional transactions even if we make a buck or two.



peace,

rono

 

So if I find a $100 bill on the road I have to report it as earned income and pay tax on it?