Must Gold and Silver Coin Sales Be Reported to the IRS?

When this article was originally published, readers were invited to review Atlanta Gold & Coin’s recent article about IRS reporting-requirement updates involving precious metals, HERE!

For many Atlanta Gold & Coin clients, precious-metals investing functioned as a passive-income activity, with gains or losses often arising through sales or market movement in their coins or bullion. As with other income sources, whether passive or otherwise, it was important for clients to understand the tax considerations connected with their transactions. When this article was originally published, one question Atlanta Gold & Coin commonly received from newer buyers and sellers was, “Do I have to report my gold and silver coin sales to the IRS?”

Under the IRS policies described in this originally published article, precious-metals dealers had a legal reporting duty for customer transactions in two situations:

1. When, at the time of publication, a customer sold substantial quantities of specified coins or bullion.
2. When, at the time of publication, clients paid $10,000 or more with cash.

Failing to report may lead to fines, penalties, or criminal charges, so understanding when a purchase or sale could be considered a reportable transaction is important for both the coin dealer and the customer. When either of the transactions discussed earlier requires reporting, precious-metals dealers have specific forms they must complete. The forms cited for this purpose are a 1099-B and an 8300.

Form 1099-B: Reporting Precious-Metals Transactions to the IRS

The 1099 series consists of forms for reporting profits earned by non-corporate sellers. The article explained that they help the IRS address tax evasion, including by tracking people who could be selling items as a source of income. In precious-metals transactions, dealers were required to prepare a 1099-B form when a customer sold products listed in the IRS’s Reportable Items List in stated quantities, discussed later in the article.

The reporting standards differed based on the coin or bullion item being sold. For client sales of bars and rounds, the principal considerations were each item’s purity and the total quantity involved. Those standards, however, were not the same for every precious metal.

For a client sale of gold bars or rounds to have been reportable under the standards described here, each individual bullion piece needed a fineness of at least .995, and the total quantity purchased needed to reach 1 kilo (32.15 troy ounces) or more. Similarly, reportable client sales of silver bars and rounds required every silver piece to have at least .999 fineness and a total purchase amount of 1,000 troy ounces or more.

Palladium and platinum bullion sales also carried reporting requirements. Under the original article’s description, a coin dealer had to issue a 1099-B for purchases totaling 100 troy ounces of palladium and 25 troy ounces of platinum, respectively. Both metals had a .9995 fineness requirement. Compared with bars and rounds, the standards for client coin sales were presented as more direct because the limitations were highly specific.

Chart: Reportable Coins

When this article was published, readers were directed to Atlanta Gold & Coin’s AML page for additional information about the chart. HERE.

Likewise, the original article identified several bullion products as exempt from reporting, no matter what quantities a customer sold at that time. The examples below were not intended as a complete list:

• Fractional Gold Coinage
• American Eagle Coins in Gold or Silver
• Foreign-currency pieces not specifically named in the IRS Reportable Items Chart
• U.S. currency pieces made after the list was created in the 1980’s did not require reporting to the IRS

When this article was originally published, readers seeking more information about, or a download of, the 1099-B form were directed directly from the IRS.

Form 8300

Under the federal tax laws described when this article was published, precious-metals dealers had to report certain client sales. They also had a legal duty to report cash payments received in one transaction when the amount was $10,000 or more. The article stated that the National Treasury created these laws in the 1980’s to monitor large commodity exchanges in the United States. It further explained that reporting substantial cash payments could help the IRS prevent potential money-laundering schemes.

At publication, To report receipt of a payment of that kind, precious-metals dealers were required to complete an 8300 form. Like the 1099-B form, it required the dealer to disclose transaction-payment details and certain information about the customer making the payment. The original article cautioned that even if clients chose to withhold some information, dealers still had to submit the form.

For precious-metals purchases, the original article defined “cash” as use of the following payment methods for purchases totaling $10,000 or less:

• Cashier checks
• Money order
• Bank drafts.
• The term “cash” may also describe payments made in either U.S. or foreign currency.

When this article was originally published, the payment methods noted above for purchases over $10,000, other than U.S. currency, were not treated as cash. As a result, they were not reported to the IRS.

When this article was originally published, other payment methods described as exempt from reporting included personal checks, bank wires, payment apps such as CashApp, Venmo, and Zelle, plus ACH transfers.

Capital Gains Tax

As noted earlier, selling precious-metal coins, rounds, and bullion may provide many clients with additional income. Under the IRS treatment discussed in this archived article, profit a customer realized from selling precious-metal assets was taxable and subject to a particular tax. That tax was called “capital gains” tax. Put another way, “capital gains” meant profit produced by selling or exchanging personal stock or other assets. For precious metals, a capital gain occurred when a specific coin or bullion item rose in value and was later sold for that higher amount. In summary, the article identified capital gains as a principal element the IRS considered in a large-transaction report.

The difference between the original cost of a precious-metal item and its eventual selling price was considered a capital gain. Accordingly, any profit from that difference was subject to capital-gains tax.

Tax Basis (aka Cost Basis)

Atlanta Gold & Coin recommended that customers keep copies of transaction receipts, since those records could help establish any tax liability connected with their transactions. Capital gains or losses were generally easier to determine when one person had purchased and later sold the identical items reported on a tax return. Gifts, inherited coins, and inherited bullion, however, could be more complicated.

The original article stated that Atlanta Gold & Coin was not a tax expert, but explained that, generally, the date a gift was received established its cost basis. For example, if parents gave someone a 1 oz gold eagle when gold’s spot price was $1,800, $1,800 would be used as that person’s purchase price for tax purposes. The article also noted that Atlanta Gold & Coin regularly purchased estate coin collections and received questions about tax liability. Where a coin collection was inherited, it said the date of death was typically used to establish the collection’s cost basis.

Depending on the date coins or bullion were received, a later sale could produce either a profit or a loss. For a profitable sale, the article explained that the value on the gift date, or on the date of death, should be used as the cost basis. This could substantially reduce tax liability because tax did not apply to the whole sale value of the coin or bullion, but only to the profit actually realized.

Summary

In closing, the original article explained that precious-metals transactions could be difficult to understand even before IRS reporting requirements were considered. It recognized that most people were not CPAs or tax accountants, and stated that Atlanta Gold & Coin was available at publication to answer questions. It also reported that few of its transactions qualified as reportable transactions and that customers were notified in advance when one did. At the time of publication, readers were invited to ask about buying or selling rates, the location, selling or purchasing coins, rounds, or bullion, and related questions.  At the time of publication, readers were invited to call, email, or fill out a form that day to arrange an appointment with Atlanta Gold & Coin.

Disclaimer: This blog did not provide investment advice, performance information, or a recommendation that any security, group of securities, investment product, transaction, or investment strategy was appropriate for a particular person. Reading the blog could not establish a reader’s personal circumstances, finances, goals, or objectives, which are individual to each person; its opinions and information were simply opinions and information. The blog should not have been used to make financial decisions, and readers were strongly encouraged to seek professional guidance from someone authorized to provide investment advice.