Congress plays chicken over paying for 1099 mandate repeal

Is this ever going to get resolved? I was hoping to be able to unload some stuff a little bit at a time but with this 1099 mess that might not be possible.

http://finance.yahoo.com/news/Congr...76.html?x=0&sec=topStories&pos=4&asset=&ccode=

 

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That's great but I don't want to GET A 1099 when I sell coins. One of the nice things about coins is for years this was truly something non-reportable.

 

Yes, it does. Just not in the manner that you are thinking some people are concerned with.

That part is absolutely correct! However, I believe you still do not realize what it is that some individuals are becoming upset about.

In a nutshell, there are two main concerns. One is, I believe, some people simply do not want to have their buying and selling transactions (with regards to gold and silver) monitored by the government. The government requires individuals to file specific forms for their capital gains and losses on their tax returns. For some people, that is more than enough "intrusion" into their "personal" activities.

What the new requirements do, however, is report "substantial" trades in their physical precious metals (and "rare" coin) investments. The individual is not required to file the 1099-MISC, but the dealer who bought the coin and/or PMs most certainly is.

The relevant law as revised reads:

Obviously, I took out wording that was not needed. You can see the current text here. The additions from the new "health care" bill are in bold.

Now, if you have 100oz in silver that you have been holding on to since the late 1980s and in 2012, you start selling it little by little each month to a local dealer, the moment that dealer has paid $600 or more to you during 2012, he will have to file and send you a 1099-MISC by January 31, 2013, with the gross amount he paid you for the entire year as well as your contact information and social security number.

What you may not understand is that a failure to provide such information could result in penalties to you as an individual.

Now, let's say you went to ten different dealers throughout the year and sold off the 100 ounces between the ten of them at $30+ an ounce. Four of the dealers you sold over 20oz. to and the other six you only sold a few ounces here and there. Well, those four that you sold 20oz.+ to are required to file 1099-MISC. You, as an individual, are also required to give EACH of those dealers your contact information and social security number, upon request (and the law requires them to "request" it).

This is the second issue people have about this whole thing. How many different dealers do some people deal $600 within a year in sales to (who now have your contact information and social security number)? As a collector, one is continuously upgrading or selling off a hoard that was bought for those few pieces needed. The local dealer is an ideal place to offload some of these extras.

What some would call "government intrusion" and the innate risks involved concerning your identity (current contact and social security number) sitting in the files and records of more than a dozen dealers is what the fret is about. And the situation simply self-perpetuates year after year. And don't forget requirements for records retention...

 

Well NPCoin, I read that whole post. Now I need a beer.

 

Suppose you have a 1937-D three legged buffalo nickel that you trade into a dealer for an up-grade. The basis of your new nickel will be the retail price (trade plus boot) of the transaction and you'll receive a 1099 misc for the trade-in nickel. The actual payment for your new nickel will be - the old nickel plus boot plus taxes on the gain realized from the old nickel. In other words I am thinking the IRS will not allow an adjustment to the basis of the new nickel under the rules established for a like-kind exchange.

 

Indeed. It is a big issue for anyone selling a coin. If a dealer sends in a 1099 on a coin that you sold to him, then you are expected to file a tax return that includes it as a line item. It most likely means that you are going to have to itemize your tax return if you want to subtract out your basis (what you paid) for the coin. If not, the entire sale will get treated as income and you will have to pay taxes on it even if you sold the coin at a loss.

The IRS does do an automated check of 1099s against tax returns. If you fail to list it, they most likely will follow-up and ask why it's missing. You may or may not have to pay a fine and will certainly have to pay interest on the missing taxes.

 

Are you sure that PayPal's and Ebay's own elected policies are not going to force a high volume "Hobbyist" to do some reporting ?

 

The problem, as I see it, is that the law will hurt the honest businessmen by forcing them to implement additional tracking systems and incur the additional expense of collecting tax IDs, prepare and mail 1099s so that some other guy who may or may not be honest can be tracked. They will also undoubtedly lose some business. Large businesses will probably be able to cope and may even benefit as their smaller competitors struggle with the new requirements and financial damage.

 

And from where, exactly, do you get the notion that the new requirements are business to business exclusively?

 

I would elaborate that the regulations defining an individual as a business in no way affects the reporting requirement itself, but affects on what form and in what manner said income (gain) is reported.

Whether you sell property as a business or a private individual, you are still required to report the income (gain).

 

This is where you are mistaken. A private individual can absolutely be considered a vendor for tax reporting purposes. They do not have to be incorporated as a business or even be running a business. If you sell a service or item to a business as an individual, the business will consider this a business expense for reporting purposes and you will be considered the vendor. The new law now requires that business to submit a 1099 for the $600+ transactions and you as the one named on that 1099 are going to have to resolve it on your taxes.

 

You just posted it. "Starting in 2012, the new regulations require any taxpayer with business income to issue 1099 forms to all vendors from whom they purchased more than $600 of goods and services in one tax year." If you sell a coin to a dealer it is considered a "goods and services", the business has to file a 1099 on it under the new law and you as the one named as the vendor on that 1099 will have to file a tax form that covers it. Now you as the individual may consider the income as a capital gain on your taxes, but that is totally irrelevant to this process.

The bottom line is this new law affects anyone selling coins regardless of whether they are a business or not.

 

That is the current law. We are talking about the "new and improved" law that added "amounts for consideration of property" and "gross proceeds" as new determinants for filing.

The fact that the individual is not a business entity in no way exempts the business entity who bought the coin form 1099-MISC filing requirements. The business paid an amount in the course of their trade for consideration of property. That is the reporting requirement and it is met, the seller being a business notwithstanding. The amount that the buying business entity is required to report is the "gross proceeds". Whether these proceeds are income or a capital gain has nothing to do with it. The gross proceeds must be reported to the IRS as an informational filing with regards to this transaction. That is the new law.

The IRS will later determine if the proceeds should be reported as a capital gain or as business income after reviewing/auditing further activity of the individual as reported on subsequent 1099-MISC forms from other business entity buyers.

The new forms have not yet finalized, and will not be soon. However, the wording of the additions to the law is clear.