UPDATE: With absolutely no fanfare, 1099 reporting of $600 transactions as called for under Obamacare was repealed April 14, 2011.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 However, precious metals investors should not hope that someone else gets the regulations repealed.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.
To learn if your House member and has signed on, go to govtrack.usHR5141. To see if your Senators have signed on, go to govtrack.us S.3578.
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.
Someone told us that gold may become subject to a 55% capital gains tax. This could cause gold owners to rush to sell their gold in order to salvage their investment. This in turn will bring down the price of gold causing even more panic selling. The government (and others like Soros) will then buy it up cheap.
Any comments or ideas about the possiblity of this happening?
Don’t know who the “someone” is, so I cannot speculate on his or her qualifications to make such a prediction. However, let’s suppose that the tax rate were raised to 55%. Undoubtedly, some gold holders would sell before the 55% rate became law. That selling would result in lower prices, but I think over a short term because many gold buyers didn’t buy looking for profits but protection from a dollar in decline. Those investors would hold through any fall in price. Still, we have to remember that this prediction is based on speculation. No one person determines the tax rates; Congess does that, which makes the speculaiton just that, speculation.
It is true that tax increases drive people of avoid taxes using measures both legal and illegal.
This kind of law drives business outside of the USA boarders.
Bill,
Didn’t ICTA broker a deal with IRS re: reporting requirements on the 1099-B. The instructions for the 1099-B which can be found here http://www.irs.gov/pub/irs-pdf/i1099b.pdf specifically address the issue (at least for 2010). How does one reconcile the new with the existing? Are those instructions going out the window? Why would that be the assumption?
The 1099-B reporting you’re referring to applies to specific products. The new regulations will apply to dollar amounts–if not repealed.
Bill, thank you for sounding the alarm. I agree with everything you had to say. I believe this is a government tax grab without any understanding of the downside of such a regulation. You may not remember but all the gold and silver that I have was purchased by you for my Roth IRA. Since Buys and Sells are not taxable events when going into or out of an IRA or Roth IRA, I do not believe I am personally affected these regulations. These regulations are simply bad law.
Your are right about your IRA transactions, they are not taxable. But, if you take an “in kind distribution” when you retire, any sales would be reported. Remember, these new regulations apply to all businesses, not just gold/silver dealers. These regulations will be a major burden on the private sector. Get busy, dash off a letter to your Senators and House rep.
As a dealer, you should not ignore the fact that you would be INSTANTLY cut out of the buy/sell loop as people would immediately sell directly to one another…your business would be over if the law is obeyed. So when do the sheeple grow a pair and give the guvmint the finger? How ridiculous must their actions become until we simply refuse to acknowledge their idiocy? Can they tax sleep? They are just a bunch of out of control people who must be made to understand the nature of freedom. I am amazed how everyone rolls over when 500+ criminals decide to make some law which, everyone knows, is unjust, immoral, and outside of their scope of constitutional power.
Yes, gold/silver holders would be reluctant to sell to dealers. As for your opinion of the 500+ criminals in DC, I agree. They will take and take and take until the American people say no more. Will voters say no more this November?
Bill, I don’t follow you. The dollar amount is actually unchanged by the amendments to § 6041. The operative change for 2012 (for purposes of this discussion) appears to be the addition of the phrase “amounts in consideration for property.” The current 1099-B does refer to specific products a/k/a property. § 6041 as amended would still require reporting “under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary” as it now requires.
I note that I am on a different plane than the other commentators, and I don’t mean to be obtuse, but why would the assumption be that the 1099-B instructions (i.e. the extent prescribed by the Secretary) are going to go out the window? Has ICTA begun any work toward a clarification based upon the existing treatment of these specific products? There is no information on this topic on their non-member site. Thank you.
I don’t assume that the existing 1099 requirements would go out the window. I don’t know if the existing regulations were amended or if the new simply supercede or if the new are in addition. If the new regulations are not repealed, there will be massive reporting not on just the few items under the currenct 1099 requirements but on transactions of $600 or more. Actually, I think the new regs would require reporting if we wrote checks of at least $600 in a calendar year.
I don’t think ICTA is seeking clarification but is spending its efforts in seeking a repeal of the new reporting regs.
The Obama Health care bill is a nightmare for small business in America. Why is a requirement to expand IRS 1099 reporting included in a health care bill anyway? Government out of control.
The 1099 provision was put in the healthcare bill because of the perception that increased reporting results in increased “tax compliance,” which, of course, means higher tax revenue to help pay for the healthcare. Overlooked–more accurately, ignored–is the burden it will put on small businesses, which, collectively, are the nation’s largest employer, bigger than Wal-Mart by far.
Bill, thanks for bringing attention to a subject that many people need to know about. It’s so important to me to research all my options and get the most money for my gold. The gold market has really helped a lot of people in distress, so optimizing their gold for the most amount of money is crucial. I hope the tax does not go into effect.
The tax was rejected by Congress, and Obama didn’t object. I guess he saw the handwriting on the wall. I’ve been negligent in not reporting that 1099 reporting on $600 transactions as outlined in Obamacare will not go into effect.