New 1099 Reporting
UPDATE: With absolutely no fanfare, 1099 reporting of $600 transactions as called for under Obamacare was repealed April 14, 2011. The votes in Congress were overwhelmingly in favor of repeal, vitually guaranteeing an override of an Obama veto, so the President signed on as if it were his idea.
Word is out about the 1099 reporting requirements that were buried in Obama’s health care legislation. If they go into effect, starting in 2012 precious metals dealers will have to report to the IRS on 1099s all purchases of $600 or more from clients in a single year.
These regulations will create a paperwork nightmare for precious metals dealers, greatly increasing our costs of doing business. As is the case in all businesses, higher costs are ultimately reflected in the prices of the products that businesses sell.
But more ominous than higher prices, sellers will have to provide identification to dealers, such as driver’s licenses and social security numbers. If that information is not adequately secured by the purchasing dealers, sellers could become victims of identity theft, which is a major crime today.
Further, the new 1099 reporting could endanger the personal safety of precious metals investors. Again, if the records are not properly secured and fall into the wrong hands, that information could cause criminals to conclude that the sellers have other precious metals in their homes.
Clearly, these regulations were not well thought out, and already there are bills in the House and the Senate to repeal these onerous and invasive regulations. To stop these regulations from going into effect, there will have to be a huge outcry – not just from precious metals dealers but from all business owners who will have to comply.
Already, trade and business associations are objecting and calling for support of the repeal bills. However, precious metals investors should not hope that someone else gets the regulations repealed. If the regulations go into effect, precious metals investors will be impacted much more than average Americans will be impacted.
The Small Business Paperwork Mandate Elimination Act
In the House of Representatives, Rep. Dan Lungren (R-CA) has introduced H.R. 5141, which would repeal the new 1099 requirement. Senator Mike Johanns (R-NE) has introduced a companion bill in the Senate, S. 3578. Appropriately, both bills are titled the Small Business Paperwork Mandate Elimination Act.
To date, 160 members of the House have signed on as cosponsors; in the Senate, nineteen Senators are cosponsoring the Senate bill.
Although the large number of early sponsors suggests the new 1099 regulations may stand a good chance of being overturned, the fight will not be easy. The Obama administration is taking the position that increased 1099 reporting will result in increased tax compliance and, therefore, increased tax revenues. Consequently, Americans who will be negatively impacted by the new regulations need to contact their members of Congress and ask them to sign on to the legislation.
The best way to make your opinion heard is to write or call. Emails, although, monitored by congressional staffers are not as effective because they are perceived (and rightfully so) as being easy to send. Letters, on the other hand, require more effort and that is known by the members of Congress and their staffers. Because this issue does not have an impending deadline, letters are recommended. Phone calls are good also, but letters do have greater impact.
The easy way to get the contact information for your representative and your senators is go to their official websites. An easy way to find those websites is to google them. For example, google US Senator Nebraska and up pops links to the websites for Nebraska Senators Ben Nelson and Mike Johanns.
Senator Johanns, as noted above, introduced the Senate bill to repeal the new 1099 regulations. Therefore, Nebraskans need not send Senator Johanns a letter asking him to cosponsor the bill, but a letter congratulating him for having the foresight to see the onerous burden that the requirements would put on businesses. It would also indicate to the Senator and his staff that you are politically savvy, something that tends to impress in Washington. Senator Ben Nelson, on the other hand, is not a cosponsor, and he needs to be contacted by Nebraskans.
Further, if your senators and member of the House have signed on, you do not want to send letters asking them to sign on. To those members of Congress who have already signed on, you want to send to them letters thanking them. Again, this shows your political savvy. However, it also gives them reasons to stand firm when the Obama administration comes around offering political favors if they will switch their votes.
Finding your member of the House of Representatives is easier than finding your Senators. Go to official House website and use the map, which comes up. A little further clicking may be necessary to determine which Representative’s district you are in.
Most people reading this blog are doing so because their interests in gold and silver. So, I emphasize again: the new 1099 regulations will have a major impact not only on the precious metals dealers but also their clients. Still, the reasons for seeking repeal are not limited to precious metals dealers and their clients.
The number of 1099s that will have to be filed will be disproportionate to the precious metals industry because gold and silver dealers not only sell to their clients, but because gold and silver dealers also buy from their clients. But, the number of 1099s generated under the new rules by gold and silver dealers will be small compared to the total generated because these rules will apply to all businesses.
If you have any comments about this blog post or suggestions about this plan of attack, post comments below. I will try to monitor daily. Note that a New 1099 Reporting category has been added (to the right) to the list of topics I blog about. I don’t doubt but that there will be many comments and posts before this battle is over.
The votes in the House (314 to 112) and in the Senate (87 to 12) signaled strong support for repeal of the 1099 provisions that crossed crossed party lines. Although some Democrats opposed the offset, momentum for repeal was too strong to prevent passage by Congress.