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Tax Implications and Reporting Requirements for Bullion Transactions
For many of our customers, investing in precious metals serves as a passive form of income that enables them to generate profits simply through the sales or market activity of their bullion. However, as with any other sources of income, passive or otherwise, customers need to be aware of the tax implications associated with their transactions. According to the IRS’s policies, there are two circumstances under which, precious metals dealers are legally obligated to report your transactions: when a customer sells large quantities of specific bullion pieces and when they pay $10,000 or more in cash. Failure to do so can result in penalty fines, criminal charges and even the possibility of imprisonment for both the precious metal dealer and the customer.
When reporting either of the previously mentioned transactions, there are specific forms that precious metals dealers are required to fill out. These include a 1099-B and an 8300, respectively. Please be advised that while JM Bullion is required to provide certain information about our customers, these details remain strictly confidential between us and the IRS; at no point will any third party have access to their private information.
The 1099 series is a set of forms used to report any profits made by non-corporate sellers. They allow the IRS to prevent any instances of tax evasion by keeping track of individuals who may be selling items as a source of income. In the context of precious metal transactions, dealers are required to fill out a 1099-B form when a customer sells them any of the products mentioned in the IRS’s Reportable Items List according to the predetermined reportable quantities. The reporting criteria varies according to the particular coin or bullion piece sold.
The reporting criteria for bars and rounds sales by customers is primarily determined by the purity and the quantity of the individual products. However, this criteria differs for each kind of precious metal. For sales of gold bars and rounds to be considered reportable, every individual piece of bullion must have a fineness of at least .995 and the total purchase quantity must be 1 kilo (32.15 troy ounces) or more. Similarly, for sales of silver bars and rounds to warrant reporting, each silver piece needs to possess a fineness of at least .999 with a total purchase quantity of 1,000 troy ounces or more. Lastly, sales of palladium and platinum bars or rounds require the smallest qualifying quantities of 100 troy ounces and 25 troy ounces, respectively. The fineness restriction for both metals is .9995.
When compared to bars and rounds, the reporting criteria for coin sales by customers is slightly more straightforward since the restrictions are so specific. There are only a few coins that are eligible for reporting. Among those coins are the 1 oz Gold Maple Leaf Coins, the 1 oz Gold Kruggerand Coins, the 1 oz Gold Mexican Onza Coins and any US coin composed of 90% silver. We are required by law to report any sales of 90% silver US coins that exceed a face value of $1,000, as well as any sales of the previously mentioned gold coins, in which more than 25 pieces have been sold.
There are, of course, a number bullion products that are exempt from reporting, regardless of the quantities that a customer sells. Such pieces include, but are not limited to gold coins with fractional denominations; Gold or Silver American Eagle Coins; any pieces of foreign currency that were not explicitly mentioned in the IRS’s Reportable Items List, as well as pieces of US currency that were created subsequent the list’s creation in the 1980’s.
According to federal tax laws, precious metal dealers are not only required to report certain sales by their customers, but they are also under legal obligation to report any cash payments they may receive for a single transaction of $10,000 or more. These laws were originally developed by the National Treasury in the 1980’s as a way to monitor large commodity exchanges within the US. By reporting these significant cash payments, the IRS is able to prevent any potential money laundering schemes, which could hurt the nation’s economy.
In order to report the receipt of such payment, precious metal dealers must fill out an 8300 form. As with the 1099-B form, precious metal dealers are required to disclose the payment details of their transaction, as well as some information about the paying customer. Please be advised that while customers have the option of withholding some of this information, precious metal dealers are still required to file this form.
With regards to precious metal purchases, the term “cash” is defined as the use of the following payment methods for purchases of $10,000 or less: traveler’s checks, cashier’s checks, money orders and bank drafts. The term “cash” can also refer to any payments made with US or foreign currency. Please note that using any of the previously mentioned forms of payment for purchases exceeding $10,000 does not constitute as cash and consequently, will not be reported to the IRS. Other forms of payment that are exempt from reporting include personal checks, bank wires, credit/debit cards, PayPal and ACH transfers.
Capital Gains Tax
As previously mentioned, selling precious metal merchandise can serve as an additional source of income for many customers. Therefore, in the eyes of the IRS, any profits a customer acquires through the sale of their precious metal assets is considered taxable and is subject to a form of taxation known as “capital gains” taxes. “Capital gains” refers to any profits that resulted from the sale or exchange of personal stock or assets. In terms of precious metals, capital gains are acquired when a particular coin or bullion piece increases in value and is then sold at that higher price. This price difference between the initial price of the precious metal and its final sale price is considered capital gain. Consequently, any such profits are subject to the capital gains tax. Please be advised that such profits are only considered as capital gains if the precious metal asset is sold. Increases in the value of an individual’s precious metal bullion due to market fluctuation will not be recognized as a capital gain and as a result, will not be subject to any taxation.
Reportable Bullion Transactions with JM Bullion
Because JM Bullion is a reputable online dealer, all purchases and sales of precious metal coins and bullion will be conducted according to the IRS policies outlined above. Please note that while this article is intended to help our customers understand the tax implications of their precious metal sales and purchases, it is not intended to serve as financial or legal advice. We encourage customers to consult with a tax professional for more specific details regarding their individual situations.
Tax Reporting FAQs
Does JM Bullion give out any of my information?
JM Bullion will never disclose any of our customers’ private information for reasons beyond certain IRS reporting policies, such as 1099-B and 8300 forms. Please note that even under these circumstances, our customers’ information will remain strictly confidential between JM Bullion and the IRS. At no point will any third parties have access to this sensitive information.
What is a 1099-B?
A 1099-B form is used by precious metals dealers to report when a customer sells them any of the products mentioned in the IRS’s Reportable Items List, according to their individual reportable quantities.
What is considered cash and what is not?
“Cash” is defined as any transaction payments of $10,000 or less that are made with traveler’s checks, cashier’s checks, money orders and bank drafts. Cash also refers to any purchases made with US or foreign currency. Personal checks, bank wires, credit/debit cards, PayPal and ACH transfers do not constitute as cash regardless of the payment amount.
Why is this form required, and why is it in place?
1099-B forms are used to inform the IRS of any profits made by a non-corporate seller. They enable the IRS to prevent any potential tax evasion by monitoring individuals who may be selling items as a source of income.
What types of bullion are exempt from a 1099-B? Which are not?
Gold coins with fractional denominations; Gold and Silver American Eagle Coins; any pieces of foreign currency that were not mentioned in the IRS’s Reportable Items List; and any pieces of US currency that were created subsequent to the list’s creation are all exempt from reporting through a 1099-B form. However, any of the coins or bullion pieces that are mentioned on the IRS’s Reportable Items List are subject to reporting, provided they meet the prescribed quantities. These include 1 oz Gold Maple Leaf Coins; 1 oz Gold Krugerrand Coins; the 1 oz Gold Mexican Onza Coins and any US coin composed of 90% silver, as well as all precious metal bars and rounds.
Why are certain products exempt from a 1099-B?
Certain products are exempt from the 1099-B form, because they do not meet the minimum composition purity. This applies strictly to precious metals bars and coins. Other products are exempt, because they possess a fractional denomination. Still, the most common reason that products are exempt from reporting is due to the fact they were not in existence when the IRS’s Reportable Items List was created.
Do I have to pay taxes if I sell gold or silver?
When customers sell their gold or silver, they are only required to pay taxes if they made any profits from the sale, in which case they will be required to pay capital gain taxes. However, if the sale of their gold or silver assets results in loss or no profit, customers will not be subject to the capital gains taxes. Please note that these tax policies can vary for state to state and customers are advised to seek a tax professional for more specific details.
What is a Form 8300?
A form 8300 is used by precious metals dealers to report any cash payments they receive on transactions of more than $10,000. They are required by the IRS to keep track of substantial commodity exchanges within the country.
What types of transactions require a Form 8300?
Precious metals dealers are required to report any single transaction in which a customer provided a cash payment of $10,000 or more. Also subject to reporting are any sales that occurred within a 24 hour period and whose combined total is equal to or greater than $10,000.
Do I have to pay sales tax on my purchase?
As a retailer based in Texas, we are NOT required to charge sales tax to Texas residents nor to out of state residents. Always be sure to speak with your tax adviser for specific taxation advice in your jurisdiction