Tax Reporting Requirements for Bullion Transactions
The information provided herein is for educational purposes only and is not intended to serve as financial or tax advice. Please consult your tax professional for advice regarding your individual financial or tax situation.
There are two circumstances in which precious metals dealers are legally obligated to report consumer transactions to the IRS:
- when a consumer sells reportable quantities of specific bullion or coins; and
- when a consumer buys goods from a dealer and pays $10,000 or more in cash for the goods.
The former is a tax issue and will be discussed below. The latter is an anti-money laundering issue and is not the subject of this post.
When a consumer sells a reportable quantity of specific bullion or coins, precious metals dealers are required to file Form 1099-B with the IRS. Failure to follow reporting requirements can result in the IRS issuing monetary fines, or even criminal charges against both the precious metal dealer and the customer. It is SellYourGold.com's policy to file Form 1099-B in accordance with IRS guidelines for all reportable transactions. Please be advised that while SellYourGold.com 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 various types of income other than wages, salaries and tips. They allow the IRS to prevent tax evasion by keeping track of individuals who may be selling assets as a source of income. Form 1099-B (Proceeds from Broker and Barter Exchange Transactions) is the IRS form that lists gains or losses for certain kinds of consumer transactions. 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 required to be reported to the IRS. Reportable coins include the following:
- 1 oz Gold Maple Leaf (minimum of 25 coins)
- 1oz Gold Krugerrand Coins (minimum of 25 coins)
- 1 oz Gold Mexican Onza (minimum of 25 coins)
- US coin composed of 90% silver (i.e., pre-1964 silver coins)
We are required by law to report any sales of the above-mentioned gold coins, in which more than 25 pieces have been sold. We are required to report sales of 90% silver content 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.
Capital Gains Tax
The IRS considers any profits a customer gains through the sale of their precious metal assets as taxable and is subject to "capital gains" taxes. "Capital gains" refers generally to any profits that resulted from the sale of property or an investment. In terms of precious metals, capital gains are occur when a particular coin or bullion piece increases in value after initial purchase and is then sold at a higher price. Any such profits are subject to either a short-term or long-term capital gains tax, depending on how long the asset was held prior to sale.