While I agree with the sentiment, I think the piece was sloppy. In particular, this:
Did you know that the so-called health care reform bill contained a provision creating a tax on people who buy and sell gold coins?
is not, on the face of it, factually accurate. (This according to a coin dealer I know.)
The true issue is a bit more insidious.
There is no tax, only reporting requirements - the 1099 required to be issued by businesses to all "vendors" paid over $600.
Now, the thing is, you walk into a coin shop and sell them one gold eagle, and blam, you're over the limit. So the dealer has to issue you a 1099 at tax time - and file one with the Feds - and for that he needs your SSN and other info, basically an identity theft starter kit. Awesome.
The paperwork sucks for everyone, but it particularly sucks for coin dealers - and it sucks for their customers who trade with them.
But it's not a tax, and coin dealers are not specified in the statute.
This is the kind of thing the juicebox mafia (Yglesias et al) just love - "OMG look at the wingnut idiot Sowell spreading lies and fear".
I tend to think pundits should get the facts straight at this level - don't present your enemies easy targets. There's been a bunch of noise about the coin dealer thing and there is definitely something to the issue, but too many games of "telephone" get played and the issue is distorted to the point where it is represented in a manner which is factually untrue.
I have to admit I've never liked Sowell. I have a memory of picking out similar factual issues with his writings decades back when I was more on the left. Even though my outlook has drifted into alignment with his, I remain unimpressed with his writing.
Yes, this is a reporting requirement. You're reporting to the feds that you have made income from your sale of the gold, and the income WILL BE TAXED when you include it on your return (you'd better include it...the IRS knows you have it because whoever bought your gold reported it to them and issued you a 1099).
The trick is to report the sale (on your return) as an investment, not as a collectible. There is a huge difference in the applicable tax rates.
This new reporting requirement is seeking to plug a hole. Many, many people are selling their gold (especially in the form of jewelry) to make ends meet. The IRS wants their share. Even the scruffy flea market vendor who buys the gold coin you inherited from your grandpa is required to issue a 1099 if the sale exceeds $600. Lovely.
{Psst...all of the above information is courtesy of my aunt the accountant, who is here visiting from Portland.} :)
(For those of you who aren't on Facebook (or who don't read it regularly), I went fishing Monday with my mom and my aunt and we caught oodles of trout.) :)
The IRS will be data mining Facebook soon enough, if they aren't already.
lady red - I'm not sure the "trick" you described above is such a great idea.
I've never heard that the classification of gold as a "collectible" or an "investment" is up to the discretion of the filer - I believe it is a requirement to treat it as a collectible (which IIRC is a 28% tax rate).
Since the cap gains rates will be going up, it will make less of a difference in the future (unless the "collectible" tax goes up too).
The tax treatment of gold extends to tradable securities backed by gold. ETFs which hold actual gold (such as GLD) are treated as collectibles when reported to the IRS. However, ETFs which invest in gold futures are treated differently. Gold miner stocks are treated the same as any other stock.
The treatment of gold as a collectible is of course completely ridiculous - it's a financial instrument and should be treated as such*. But the "collectible" treatment is the law, I believe. I think it's a holdover from the days (1933-1971) when private gold ownership was illegal; the only kind of gold you could hold was of a "collectible" nature (jeweler, and coins with numismatic significance). I suppose we should be grateful our permissive government allows us to keep gold at all.
*(If you doubt this, consider that gold is used to secure currency swaps at the Bank of International Settlements (the clearing bank of Central Banks), and is held as a reserve asset on Central Bank balance sheets the world over. Try to go to the Fed or the BIS or the IMF and secure overnight repo finance with some awesome loot from the Antique Road Show - heck, from the Smithsonian, even. You won't get far. But they will be happy to take your gold as collateral.)
While I agree with the sentiment, I think the piece was sloppy. In particular, this:
ReplyDeleteDid you know that the so-called health care reform bill contained a provision creating a tax on people who buy and sell gold coins?
is not, on the face of it, factually accurate. (This according to a coin dealer I know.)
The true issue is a bit more insidious.
There is no tax, only reporting requirements - the 1099 required to be issued by businesses to all "vendors" paid over $600.
Now, the thing is, you walk into a coin shop and sell them one gold eagle, and blam, you're over the limit. So the dealer has to issue you a 1099 at tax time - and file one with the Feds - and for that he needs your SSN and other info, basically an identity theft starter kit. Awesome.
The paperwork sucks for everyone, but it particularly sucks for coin dealers - and it sucks for their customers who trade with them.
But it's not a tax, and coin dealers are not specified in the statute.
This is the kind of thing the juicebox mafia (Yglesias et al) just love - "OMG look at the wingnut idiot Sowell spreading lies and fear".
I tend to think pundits should get the facts straight at this level - don't present your enemies easy targets. There's been a bunch of noise about the coin dealer thing and there is definitely something to the issue, but too many games of "telephone" get played and the issue is distorted to the point where it is represented in a manner which is factually untrue.
I have to admit I've never liked Sowell. I have a memory of picking out similar factual issues with his writings decades back when I was more on the left. Even though my outlook has drifted into alignment with his, I remain unimpressed with his writing.
Yes, this is a reporting requirement. You're reporting to the feds that you have made income from your sale of the gold, and the income WILL BE TAXED when you include it on your return (you'd better include it...the IRS knows you have it because whoever bought your gold reported it to them and issued you a 1099).
ReplyDeleteThe trick is to report the sale (on your return) as an investment, not as a collectible. There is a huge difference in the applicable tax rates.
This new reporting requirement is seeking to plug a hole. Many, many people are selling their gold (especially in the form of jewelry) to make ends meet. The IRS wants their share. Even the scruffy flea market vendor who buys the gold coin you inherited from your grandpa is required to issue a 1099 if the sale exceeds $600. Lovely.
{Psst...all of the above information is courtesy of my aunt the accountant, who is here visiting from Portland.} :)
{Psst...all of the above information is courtesy of my aunt the accountant, who is here visiting from Portland.}
ReplyDeleteAnd who will be issuing the 1099 for the 69 fish she caught yesterday...hmmm...
LMAO, Fay!
ReplyDeleteFay, ROFL!!! Good one!
ReplyDelete(For those of you who aren't on Facebook (or who don't read it regularly), I went fishing Monday with my mom and my aunt and we caught oodles of trout.) :)
The IRS will be data mining Facebook soon enough, if they aren't already.
ReplyDeletelady red - I'm not sure the "trick" you described above is such a great idea.
I've never heard that the classification of gold as a "collectible" or an "investment" is up to the discretion of the filer - I believe it is a requirement to treat it as a collectible (which IIRC is a 28% tax rate).
Since the cap gains rates will be going up, it will make less of a difference in the future (unless the "collectible" tax goes up too).
The tax treatment of gold extends to tradable securities backed by gold. ETFs which hold actual gold (such as GLD) are treated as collectibles when reported to the IRS. However, ETFs which invest in gold futures are treated differently. Gold miner stocks are treated the same as any other stock.
The treatment of gold as a collectible is of course completely ridiculous - it's a financial instrument and should be treated as such*. But the "collectible" treatment is the law, I believe. I think it's a holdover from the days (1933-1971) when private gold ownership was illegal; the only kind of gold you could hold was of a "collectible" nature (jeweler, and coins with numismatic significance). I suppose we should be grateful our permissive government allows us to keep gold at all.
*(If you doubt this, consider that gold is used to secure currency swaps at the Bank of International Settlements (the clearing bank of Central Banks), and is held as a reserve asset on Central Bank balance sheets the world over. Try to go to the Fed or the BIS or the IMF and secure overnight repo finance with some awesome loot from the Antique Road Show - heck, from the Smithsonian, even. You won't get far. But they will be happy to take your gold as collateral.)