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Guide to Taxes, Reporting, and IRAs

No one needs to be told that if they profit on a transaction, the Internal Revenue Service will be around shortly after to determine their share of the proceeds. For those wondering whether they need to file taxes on their precious metal purchases, the short answer is probably yes. That being said however, nothing in this article should be considered tax advice, and for specific tax-related information regarding your tax responsibilities you should speak with your accountant for detailed information regarding your specific situation. For those with general questions regarding the buying and selling of precious metals however, and their potential tax responsibility, this article details the information you will need to know prior to scheduling that appointment with your tax preparation professional.

Cashing in on the Barter Economy

People collect and invest in precious metals for a myriad of reasons. Whether they appreciate the stable growth of a particular precious metal commodity, or they thrill from the visceral response of knowing that they alone know that they have a half a pound of gold stuffed in the back of their bedroom closet. Unfortunately, in certain instances, the Internal Revenue Service may be interested in what is stored under those blankets in that closet. In fact, they are so interested that they have devised a specific form to help keep track of your precious metal holdings. Dubbed Form 1099-B, and creatively entitled, “Proceeds from Broker and Barter Exchange Transactions,” this document finds usage when documenting the gains and losses associated with the sale and purchases of precious metals.

Defining the “Broker”

Broadly stated, a broker is defined by the IRS as any person or entity that facilitates a transaction made between other parties in the course of their business or trade. Indeed, a broker can be an individual, a governmental entity, a foreign national, or a corporation routinely redeems its own shares falls under the umbrella term “broker” when it comes to IRS nomenclature.

Under IRS guidelines, a broker must file a Form 1099-B on each person involved in a host of transactions to include:

  • Commodities
  • Stocks
  • Foreign Currency Contracts
  • Debit instruments
  • Regulated Futures Contracts
  • Precious metals

The 1099-B Form

Designed to capture a wealth of financial information regarding each transaction, the 1099-B Form requires detailed data on a myriad of items that include:

  • Payers name and address
  • Payers FIN number
  • Name and address of recipient
  • Recipient’s account information
  • Detailed description of property
  • Date acquired
  • Date sold
  • Proceeds
  • Additional costs and fees
  • Loss or gain
  • Federal income tax withheld
  • Profit or loss on closed contracts
  • Unrealized profit or loss on open contracts
  • CUSIP number

Reportable Bullion Transactions

As mentioned, in certain instances, the IRS mandates that applicable bullion transactions be reported to the Treasury Department. As such, regulations mandate that bullion dealers report when certain precious metal transactions occur, such as:

  • Minimum Silver Fineness: .999 of 1000 Troy ounces or more
  • Minimum Gold Fineness: .995 1 kilo (32.15) Troy ounces or more
  • Minimum Platinum Fineness: .9995 of 25 Troy ounces or more
  • Minimum Palladium Fineness: .9995 of 100 Troy ounces or more

In addition to bulk-weight bullion purchases, the Internal Revenue Services requires the following be reported following a transaction when the quantity exceeds 25 coins:

Finally, whenever a cash transaction exceeds $10,000 or a series of cash transactions, when combined, exceeds the $10,000 threshold. With much excitement and interest surrounding the investment in precious metals, understanding the tax implications of those investment transactions is critical to making an informed buying decision, so be sure to schedule an appointment with your Certified Public Accountant or tax preparation professional to guarantee that you do not run afoul of the tax man this reporting season.

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