Huge Upcoming Tax Implications For Coin Sales Over $600

Speaking as an accountant at a small business - the 1099 reporting requirement is nothing new. All businesses have had to do this for years. Businesses have been required to issue 1099s to landlords and attorneys no matter the amount, as well as issue them to all independent contractors from which they have received a service. In other words, if a small business gets a college kid to come in on weekends to sweep up and empty the trash - if the company pays the kid more than $600 in one year, the company will issue a 1099 to the kid. This does two things: (1) it notifies the IRS that someone earned $600+ and has had no taxes withheld, and (2) it allows the business write this off as a business expense.

What is going to change in 2012 is two things. Previously, if a business received a service from a corporation, the business did not have to issue a 1099 to the corporation. The second thing that will change is that the reporting requirement no longer applies only to services, but to goods as well. This is where small coin dealers are getting caught. They purchase a good from someone in the form of a coin. If they purchase $600 worth of coins from one individual in a year, the coin dealer will have to issue a 1099 to that individual. This doesn't mean anyone's taxes are going to increase though. It is a bit of an accounting headache for all small businesses though, not just coin dealers.

The business will be required to mail out a 1099 to everyone (individuals and corporations) that the business has paid $600+ in one year. Reporting to the IRS is done electronically.

All businesses, if they don't already, will need to get a qualified accountant to take care of this.

Coin dealers are already required to fill out SARs (Suspicious Activity Reports) as well as other documents whenever they engage in a transaction with one individual. The trigger is only a few thousand dollars. Usually, they are no big deal - but this is one of the ways that the government catches large drug dealers, for example. Rather than carry around tens of thousands of dollars (we all know they don't use banks for obvious reasons), some crooks will purchase gold bullion.

All coin dealers, as well as all other businesses, will be required to do is collect name, address, and social security number of anyone from which they purchase coins.

Personally, I am serously considering setting up my own business - just to assist other small businesses with the reporting requirements. There are so many small businesses out there that will need help it isn't funny. And it will be extremely easy for the IRS to find businesses that do not comply.

I really see one of two things happening. If this is a precursor to the United States implementing a VAT system, nothing will change with this law. If this was intentionally written as a way for the government to collect more in taxes, nothing will change with this law. I see either of those scenarios as being equally likely. However, the other option is that Congress really didn't mean for it to apply to all goods - in which case they will amend the law to go back to only applying to services received. They intentionally, at least according to articles I've read, meant for all corporations to receive 1099s - which is why I believe this is a move towards a VAT tax.

I guess the important thing to remember though is that coin dealers have in no way been singled out by this law. All businesses will have to follow this law.

No, I don't believe I'm underestimating. Here's why. Corporation's TIN numbers are easily available now, I'm sure they will become even more so. If, for example, you need Staples TIN number, just google "Staples 10-K report". The number is printed on the face of that report. I predict many corporations will simply put a page on their website giving that information - it is public after all.

The number of 1099s going out will go up by a huge factor - probably closer to 400-500 times what goes out now. But most businesses will not be the ones sending them out - they will hire a service such as Convey to do it for them.

You, as an individual, will not have to ask for any information when you buy something. If you are a small business owner, then yes, you will need to collect some information. It's not that onerous however - I spent probably 20-30 hours a year doing this for a fairly large company (multi-millions in revenue and expenses monthly).

As for the burden on the IRS - minimal at best. They receive it electronically and it is doubtful that a human would even look at the information unless the computer flags it for some reason.

Again, this is all just my opinion, but it is based on over a decade of experience as an accountant.