COINS AND paying TAXES pls help..

Hey, I'm an engineer, not an accountant. We both work with numbers but in vastly different ways.

Maybe you're right. Maybe I'm right. I don't know. That's why I said he should consult an accountant.

 

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Mike:
It depends upon the state. Some charge sales tax, some don't.

 

I'm going to apologize for not having stated this in my first post, but GDJMSP makes a very valid point.

There is a finance forum I frequent and everytime I post any type of advice I point out one very crucial point:

The only reference that means anything in an audit is the Tax Code and IRS Publications. It makes sense to use these forums to get pointed in the right direction, but make sure you have an IRS publication saved with your tax return that defends everything you do in your tax return. Only get your publications from irs.gov to ensure that they are current and not out-dated.

The key word to look for in the publications is "Hobby". You want to find the publication that tells you how to report profit from a hobby. Coins are not the same as stocks and as others have pointed out, you want to find a receipt or documentation for any and every purchase you have made. I personally believe that only the profit at the end of the year is taxable and that almost all numismatic purchases are valid offsets when calculating that profit, but as mentioned above, find that guidance in an IRS publication and follow it. You also want to find the IRS publication on recordkeeping as it gives good advice on what type of documentation you need to retain.

Most people will never report their profit from a hobby and will get away with it, but no good can ever come from someone publicly posting that they personally partake in such practice.

 

Now, this comment really makes sense.

Anything that you do should be between you and your accountant.

 

Coleguy

Let me introduce you to my friend Joe here from the IRS. He'll be contacting cointalk this week and try to get to the bottom of this problem of your coin collecting profits.

Ruben

 

To be fair, I did a quick search and all I can find is Publication 535 (relates to Business Expenses that can be deducted). The IRS guidances place emphasis on determining whether you have a hobby or business on your hands. Beyond that, they refer to Publication 535 on what can be deducted. The limit on your deductions is how much profit you earned.

So I would personally proceed with the analogy that a coin shop can deduct the cost of coins they buy for their inventory, so you should be able to deduct the cost of coins for your collection. But as mentioned above, this is just an opinion. A CPA (Do NOT goto HR BLOCK, JH, Liberty, etc...) would best be able to answer that question.

I do believe that there is little doubt that numismatic supplies, safe, safety deposit box, security/alarm system, postage, and other related consumable can be used to offset the profit along with the cost of the coins actually sold.

I do ask this of the OP, if you do find a reputable answer (favorable or not) and find an IRS Publication, Memo, White Paper, etc... to back it up, PLEASE start a new thread and post only the relevant information so that others can not only benefit from it, but can also find it in a search (the ability to search for it quickly should justify posting it in a new thread).

 

Business or Hobby? Answer Has Tax Implications

IRS Summertime Tax Tip 2007-13


Try this, from the IRS website:

http://www.irs.gov/newsroom/article/0,,id=172833,00.html

 

If the profit from selling coins is taxed as ordinary income, it doesn't mean it is taxed at 28%. Where did that idea come from? Some people are in the 10% bracket, some are in the 15% bracket, some in the 25% bracket, etc.. Plus, many people pay no tax, and/or are in the less than 10% bracket. Bottom line is, profits from the sale of coins are NOT taxed at a flat 28% bracket.

 

exactly, well said.

 

ok this guy said he found the smooth edge error coins in case of presidential dollars so what you guys are saying is if he sells them for lets say 50 dolars he must report 49 dollar profit.... that doesnt seem rite ... i am on a fixed income and have been playing the coin game for a while are you saying that ALL coin sales and trading are taxed at 28 % ...i went to irs and their site is written very hard to understand ..... is their anything like the state lottery .what i mean is if i hit the pick three number for a cpl hundred i can use my old losing tickets as tax deductable toward what i owe...

 

sry what i am saying is how do you determine the profit on a coin you found in change you were given..is it whatever you sell it for over its face value and does anyone know of any good forums or websites on this subject or even better a book of sorts

 

Again, I am not an accountant, a CPA or a tax expert. What follows is my opinion only.

You owe person income tax on your income. Among other things, your income is the profit you made buying and selling coins. In my world PROFIT = INCOME - EXPENSES.

If during the tax year you bought one coin and sold it at a profit your reportable income for the coin is the coin's selling price minus the coin's purchase price. If you also paid to have the coin graded by a TPG your cost associated with the grading (grading fee, shipping, etc.) would be deducted from the gain on the coin.

Let's say the following year you were a bit more active:

Coin A bought for $500 and sold for $900
Coin B bought for $600 and sold for $800
Coin C bought for $750 and sold for $1,100
Coin D bought for $800 and still "in inventory" when the tax year ended

Your total sales for the year were $2,800 and your total purchases were $2,650.

Let's also say you spent $150 on slabbing fees and associated costs.

In my book you should report the following to the IRS on your personal income tax return: $0

$2,800 sales - $2,650 purchases - $150 slabbing fees = $0 net profit

When you sell the coin "in inventory" its sales price would be added to your sales for that year.

If you ended the year with a profit I believe you should be able to deduct other hobby-related expenses - things needed for the pursuit of your hobby and for coin buying and selling. Hobby expenses might include ANA membership dues, Coin World subscription, Grey Sheet subscription, loupes and microscopes, a Red Book and numismatic books needed for education and research.

To make an analogy, from a tax liability perspective, selling a coin should be like selling a house. If you sell a house and buy another house of equal or higher price within a certain time frame you do not owe income tax on the gain. You only owe income tax when you "cash out" and do not use the proceeds from your sale to buy another house.

Likewise, it would seem to me that if you take the profits from the sale of coins and use them to reinvest in buying more coins you would not owe taxes on those profits. As long as you keep reinvesting your profits in more inventory you shouldn't own taxes until you "cash out".

Again, this is only my opinion. For the record I very, very seldom sell a coin so I do not engage in the above.

 

Well if you receive say, a quarter, in change, you essentially paid $0.25 for it. If you sell it for $100, you made a profit of $99.75. Proceeds - basis = profit.

I don't believe you can use the "like kind exchange" argument on collectibles that you're only buying and selling as a hobby, not generally anyway. There may be exceptions, but special rules apply. Consult a certified tax accountant if you have questions about such things. Will give you some legal advice: note reporting income that is legitimately taxable is a crime, whether you get caught or not (just as it's illegal to run a red light, even if a cop didn't see you do it.) If we're talking about tiny amounts, administrative convenience comes into play, the IRS won't particularly care that you sold a coin for $2 that you bought for $1. But if you're making significant profits on the sale of coins, you best figure out what the legal requirements are.

 

Some pretty good reasons NOT to take your advice on the legal issues arising under both U.S.Code Title 26 (Internal Revenue) and the revenue and taxation laws of an individual's state of residence.

If by chance someone committed a tax crime - a distinct possibility if that advice is fully followed - reliance on someone's guesses about the law would be no defense.

Lawyers, accountants and IRS enrolled agents are licensed to give advice because of their special training and experience. That's why they can legally charge for their services and advice.

 

Correctomundo!!

The tax law is very simple. If you realize ANY capital gains on the sale of ANY asset it is a taxable event and uncle wants a piece. Period. For collectibles it's 28% and this same applies to most forms of bullion and even includes the bullion ETF's (exchange traded funds) such as GLD and SLV.

You can sometimes slide under the RADAR by what's referred to as the Garage Sale exemption, but for anyone doing major business in coins this is really pushing the envelope.

To be able to deduct expenses you need to establish that your collecting hobby is really a business and this takes a minimum of three years of business records at least attempting to make a profit.

Do NOT play games with the IRS. For a sale here or there on a fairly casual basis are they going to catch you? Quite possibly not. However, if they do, be prepared to eat some serious humble pie and cooperate fully while they take a piece of your edited.

And whatever you do, do not EVER lie to the gov't, particularly the IRS.

Ask Al Capone, Dick Nixon and Martha Stewart. They do NOT care for folks lying to them and will crusify you literally.

peace,

rono

 

Let us not forget who is the number one seller of coins The Mint which is part of the U.S. Dept. of Tresury There are 12 bureau's in the U.S. Dept. of Tresury. Just a few of them IRS ,ATF, BEP, Mint.


http://www.ustreas.gov/bureaus/index.html

 

Why does everyone keep throwing out the 28% income tax and/or capital gains tax rates? Capital gains can be taxed at 5%, 15%, 25% or 28%. For 2008 there is even a 0 (yes zero) capital gains tax rate. It is kind of complicated, but it depends on a lot of factors, including when you bought the items, and how long you held them before you sold them. Seems to me that not many people know much about tax law, and maybe they should, as it can get quite expensive to pay someone to do it for you.

 

I never said I profited at all. That was my point. Not to mention, it's pretty hard to run an audit on a hobby where expense exceeds any income. Oh, and I live in a state that doesn't charge taxes on "coin exchanges".
Guy~

 

Yes capital gains for many types of items can be taxed at those different rates but not coins and collectibles . They are spcificly stated to be taxed at the 28% rate. (Or at least they were in previous years. If they aren't now it would be because of a change to the code this year. As far as I know, they still are.)