Anonymous Trading of Coins Ends in 2012

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machinehead's picture
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Anonymous Trading of Coins Ends in 2012

A horrifying poison pill was slipped into the Obamacare law -- universal issuance of Form 1099s for buyers and sellers of over $600 worth of coins -- bullion coins, numismatic coins, you name it. From Numismatic News:

A blizzard of paperwork could be about to hit numismatics.

Passage by Congress of the national health care legislation has had an unintended consequence to the nation’s coin collectors, vest-pocket dealers who buy and sell coins, and larger dealers who are frequent buyers of coins that collectors periodically liquidate as they trade up their collections for better coins, or simply sell to take a small profit or loss.

What has happened is that effective Jan. 1, 2012, the whole system of giving and receiving Internal Revenue Service 1099 forms will be turned on its head and all persons (including corporations) who are in business will now have to give 1099 tax reporting forms for coins and other goods that they sell as well as buy.

The responsibility for issuing forms kicks in at $600 for coins or bullion – not a very high level and one that has already started sounding alarm bells. It doesn’t matter in what form payment is made, whether cash, check, credit card, or Yap stone money, the $600 threshold applies.

There’s a bill introduced by Rep.  Dan Lungren  (H.R. 5141), which has gathered over 80 members of Congress as co-sponsors to repeal this section. Evidently, however, the drafters of the provision think there is a $17 billion loophole that this plugs. 

The Industry Council for Tangible Assets is alerting member dealers and the public at large in the hope that some sense of outrage will lead to a ready modification before the law becomes operational in 2012.

http://www.numismaticnews.net/article/600_sale_Tax_form/

Commentators have suggested that the flood of 1099 forms will simply bury the IRS. Some of the more libertarian-minded have recommended deliberately monkey-wrenching the system by 'accidentally' transposing a couple of digits in the tax ID number. It's a 'deniable' mistake, but the surveillance state is unlikely to have the resources to untangle millions of 'mismatches.'

This disgusting intrusion is by no means an 'unintended consequence,' though. A seamless surveillance state needs 'total information awareness' of the pharmaceutical consumption, health status, and financial transactions of its human livestock. The first they've already got [NASPER -- look it up], and the latter two will step up a notch on the first of January, 2012.

Sounds like CB slang, don't it -- '10-99 good buddy. I'm outta here!' Frown

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Re: Anonymous Trading of Coins Ends in 2012

I'm surprised they are waiting till 2012. I think this shows that they are planning ahead if they need to confiscate the gold at some point in the future.

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Re: Anonymous Trading of Coins Ends in 2012

Insane. Absolutely insane. 535 nuts running what has turned into an asylum. 

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Re: Anonymous Trading of Coins Ends in 2012

Thanks, Machinehead! My initial reaction is WTF is this doing in the health care bill? Now as it settles I'm thinking about what else is lurking inside this bill and whether TPTB will ultimately have the resources to enforce them. No doubt more will come to me as I'm cleaning the guns...

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Re: Anonymous Trading of Coins Ends in 2012

investorzzo wrote:

I'm surprised they are waiting till 2012. I think this shows that they are planning ahead if they need to confiscate the gold at some point in the future.

It's highly doubtful that their creaky computer systems will be able to match millions of 1099 forms within a decade, much less by 2012. Here's more on the 1099 horror:

Section 9006 of the health care bill — just a few lines buried in the 2,409-page document — mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year

Right now, the IRS Form 1099 is used to document income for individual workers other than wages and salaries. Freelancers receive them each year from their clients, and businesses issue them to the independent contractors they hire.

But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they’ll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.

The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations.

Taken together, the two seemingly small changes will require millions of additional forms to be sent out.

http://sweetness-light.com/archive/obama-care-requires-millions-more-1099s

The article speculates on what it all means:

When you think about it, these new requirements could also serve as a very handy bridge to a VAT tax — which is surely coming.

In fact, it probably shows that the VAT tax was already in the back of the Democrats’ minds when the ‘healthcare reform’ bill was being cobbled together in the first place.

In any case, it certainly means that the ability to anonymously buy and sell coins from commercial dealers will disappear. Tangible goods, including coins, were one of the last refuges of untitled assets which might escape reporting. The last vestige of financial privacy is now being removed. 

Who knew that 'free health care' meant being stripped naked? VAT DID YOU EXPECT, HMM? Tongue out

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Re: Anonymous Trading of Coins Ends in 2012

mooselick7 wrote:

Thanks, Machinehead! My initial reaction is WTF is this doing in the health care bill? Now as it settles I'm thinking about what else is lurking inside this bill and whether TPTB will ultimately have the resources to enforce them. No doubt more will come to me as I'm cleaning the guns...

Some of us can remember when Congress used to exclude amendments to bills on the basis that they were 'non-germane.' That old-timey custom is long gone, and so is democratic transparency. Like cockroaches, KongressKlowns prefer to operate under the cover of darkness.

Presumably the 1099 filing requirement affects gun dealers as well. Got ammo?

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Re: Anonymous Trading of Coins Ends in 2012

This will not result in "millions" of 1099 forms, it will have to be billions.  Many billions.  If submitted in paper form, I cannot even imagine the paper processing headache this would cause.  No doubt the amendment was slipped in at the behest of a well-connected data input outsource provider.

Next, businesses will partially adjust by bundling their sales and receipts to avoid the extra work....or going the opposite way and breaking sales down into units of $599.99.

The intent behind the amendment was that it would provide $17 billion in "funding" for the HC bill...but I predict that it will cost twice that to implement and recover perhaps half that.

You know, a typical government loss on investment (LOI).   

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Re: Anonymous Trading of Coins Ends in 2012

cmartenson wrote:

Next, businesses will partially adjust by bundling their sales and receipts to avoid the extra work....or going the opposite way and breaking sales down into units of $599.99.

Oh, dear -- you didn't really type that, did you? The United States Code, Title 31, Subtitle IV, Chapter 53, Subchapter II, Section 5324(b) [I am not making this up], titled 'Domestic Coin and Currency Transactions Involving Nonfinancial Trades or Businesses,' already provides that:

'No person shall, for the purpose of evading the report requirements of section 5331 or any regulation prescribed under such section—(3)structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with 1 or more nonfinancial trades or businesses.'

http://www.law.cornell.edu/uscode/31/5324.html

Dividing transactions into smaller chunks to escape reporting is a money laundering offense (a 'crime' which didn't even exist 30 years ago, having no basis in common law). The standard penalty of 5 years is doubled to 10 years if you're violating another federal statute at the same time (such as the new Section 9006 of Obamacare).

Oh well, at least there's free health care in prison. Laughing

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Re: Anonymous Trading of Coins Ends in 2012

Once in prison, we can go to a simpler currency ....

http://online.wsj.com/article/SB122290720439096481.html

Got mack?

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Re: Anonymous Trading of Coins Ends in 2012

machinehead wrote:

cmartenson wrote:

Next, businesses will partially adjust by bundling their sales and receipts to avoid the extra work....or going the opposite way and breaking sales down into units of $599.99.

Oh, dear -- you didn't really type that, did you? The United States Code, Title 31, Subtitle IV, Chapter 53, Subchapter II, Section 5324(b) [I am not making this up], titled 'Domestic Coin and Currency Transactions Involving Nonfinancial Trades or Businesses,' already provides that:

'No person shall, for the purpose of evading the report requirements of section 5331 or any regulation prescribed under such section—(3)structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with 1 or more nonfinancial trades or businesses.'

It clearly says "No person..." so if one is operating as a corporation we can assume the letter of the law allows some lattitude here?There must be a reason for such a glaring oversight.

I assume this is the "Goldman clause" which will allow them to continue to assist entities like Greece, the NY state pension,  Illinois, etc., in structuring their transactions in a way to allow them to evade their actual reporting requirements.

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Re: Anonymous Trading of Coins Ends in 2012

I'm on the side of: It will inundate the IRS with so many forms it can't keep up.  The IRS doesn't have the manpower to electronicly enter the 1099s it currently gets -- except for the one that it gets from other computers at banks mortgage companies insurance companies, etc.  I must get 300 1099s from insurance companies at the end of the year for payments i recieved on my patient's insurance -- sometimes I get a separate 1099 from each plan an insurance company sponsers, ie dozens from blue cross.  These are not entered to the IRS computers, because there are there are probably 500 million of them if you add up all the doctors in the country (can you comprehend the manpower it would take to enter that information?)

I forsee the same for the millions of scraps of paper they would get from this boondoggle.

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Re: Anonymous Trading of Coins Ends in 2012

Am I misreading or is this just an amendment meant to limit the citizenry from owning actual wealth without the .gov knowing where it is and in what quantities?

To me, this looks like the Depression is not going well, and the FR is playing the strategic long game. Isolate owners of tangible hard currency, and make good and sure that the population doesn't increase without several things:
1. A written paper trail that;
1a. Identifies the owner, and;
1b. Tells you where they live

2. Places inconvienience on owning PM's so that more people are not tempted to diversify as the dollar continues to tailspin towards mother earth at neck-breaking speeds

3. Make the transaction of Gold seem even more "fringe" by forcing heaps of paperwork in the path of anyone who wants to protect their actual wealth.

4. Create yet another taxible intervention into the private lives of decent folks.

Shades of FDR. http://www.the-privateer.com/1933-gold-confiscation.html

Cheers?
Aaron

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Re: Anonymous Trading of Coins Ends in 2012

Outstanding work Machinehead.  You’ve found a hidden and serious threat here.  How appropriate to post it today.  We’ve lost a lot of freedom since July 4, 1776. 

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Re: Anonymous Trading of Coins Ends in 2012

What is really pathetic is the 535 Bozos in the Kongress most of whom do not even read the bills they are voting on much less comprehend the implications of the possible side effects. They just vote the way the leadershit tells them.

Ken

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Re: Anonymous Trading of Coins Ends in 2012

It clearly says "No person..." so if one is operating as a corporation we can assume the letter of the law allows some lattitude here?

So sorry Chris:

§ 5312. Definitions and application

....

(5) “person”, in addition to its meaning under section 1 of title 1, includes a trustee, a representative of an estate and, when the Secretary prescribes, a governmental entity.

http://www.law.cornell.edu/uscode/31/usc_sec_31_00005312----000-.html 

(I imagine that "governmental entity" in this context would include the US mint)

....

For example, the US Code defines "person" as follows (at Title 1, Chapter 1, ¶1):

"The words person ... include(s) corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals."

http://www.duhaime.org/legaldictionary/P/Person.aspx 

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Re: Anonymous Trading of Coins Ends in 2012

crash_watcher wrote:

It clearly says "No person..." so if one is operating as a corporation we can assume the letter of the law allows some latitude here?

So sorry Chris:

(...)

Dang!

I don't get it, where's the Goldman loophole? 

Oh wait, I think I see it...."person" does not include the government itself, so the various penalties, requirements and restrictions only apply to everybody else.

If I could ever only pass one law it would be that the government has to live by the same rules that it passes.  With an amendment stapled on that inescapably directs that when hostile activities are commenced against any nation that the very first people to get sent over to the front lines are the 18-39 year old children, and/or grandchildren as appropriate, of the lawmakers.

Somehow I can imagine that the debates would be more well attended than the shams I saw in 2002 where lonely congresspeople urging restraint were speaking to virtually abandoned chambers.

Just a thought.

--------------------------------------

Excellent research Crash_Watcher.   Thank you.

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Re: Anonymous Trading of Coins Ends in 2012

According to CNN Money.com this is part of a long term campaign and we can expect more “revenue enhancers” like this.  Here is an excerpt from an article with a lot more information and links.  You should read the whole thing.  They are desperate for money and will systematically plug any gaps they can by insertion into unrelated bills.

=====

http://money.cnn.com/2010/05/21/smallbusiness/1099_deluge/index.htm

But the provision appears to be a long-in-the-works change that was just waiting for the right moment to be attached to legislation.

Back in 2007, the Senate Finance Committee asked the government's General Accountability Office to conduct a tax-gap study. The resulting report estimated that establishing additional 1099 paper trails for income could provide up to $345 billion annually in new federal tax revenues.

Enter the health reform bill. Last fall, as the debate raged over its projected cost, Congressional supporters of the bill began a desperate search for "revenue enhancers" to bring the net cost down -- and eliminating the 1099 exceptions for corporations and goods was seen as an easy way to bring in more cash without raising tax rates.

House and Senate staffers "essentially have a cupboard full of convenient revenue raisers that they can put into bills when they need it," notes Chris Edwards, director of tax policy studies for the libertarian Cato Institute. In the case of the 1099 changes, he says, "this was sitting around, the IRS wanted it and had testified in favor of it, and they needed a revenue raiser. This was just a convenient thing."

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Re: Anonymous Trading of Coins Ends in 2012

Good article Travlin, thanks for posting it.  Along a similar vein, I believe that State budget deficit problems will finally result in the passage of legislation to institute a sale tax on all inter-state internet transactions (I fact, I'm surprised that this wasn't also part of the Health Care Bill-hey, maybe its hidden in there somewhere!!!):

Delahunt, a Massachusetts Democrat, introduced a bill on Thursday that would rewrite the ground rules for Internet and mail order sales by eliminating the option for many Americans to shop over the Internet without paying state sales taxes.

At the moment, Americans who shop over the Internet from out-of-state vendors usually aren't required to pay sales taxes. Californians buying books from Amazon.com or cameras from Manhattan's B&H Photo, for example, won't be required to cough up the sales taxes that they would if shopping at a local mall.

This is hardly a new debate: pro-tax officials and state governments have been pressing Congress to require taxes to be collected for a decade or so. They argue that reduced sales tax revenue threatens budgets for schools and police, and say that, as a matter of fairness, online retailers should be forced to collect the same taxes that brick-and-mortar retailers do.

http://news.cnet.com/8301-13578_3-20009603-38.html 

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Re: Anonymous Trading of Coins Ends in 2012

I am at my f***ing wit's end here.  I am having a difficult enough time trying to draft a viable plan for a small business in an uncertain future with a likely high tax environment, but how could a small family business afford reporting requirements like this?  I know many here run businesses of their own... do any of you have any idea how costly these requirements (both for the $600+ transactions and credit card transaction reporting requirements mentioned in the CNN article above) would ultimately be for your own business?  Even with an option for sending the reports electronically to the IRS, this seems like it would require in most cases an employee (or in the case of big companies, tens or hundreds or thousands) hired solely for the purpose of managing the paperwork needed for these requirements.  One would have to pass on the costs to one's customers, at a time where incomes are stagnant or declining and people are overburdened with debt.  Whether or not the IRS can actually process or do anything with all these new forms won't change that.  

Anybody else having any flashbacks to the movie Brazil right now?

- Nick

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Re: Anonymous Trading of Coins Ends in 2012

I have no idea how we will comply with this. I have 5 employees and only gross about 500 a year, but with margins getting increasingly tight. I will lose everything if this business fails.

I am sure the Fed can print enough money to pay out some more unemployment bennies right? From Obama's stash?

If I am legislated into failure, I will return to my previous life as a soldier. Just more in keeping with the guys who crossed the Potomac.

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Re: Anonymous Trading of Coins Ends in 2012

From just a cursory read, I'm getting the impression that this would mean all businesses would need to track total annual sales to individuals and report all activity exceeding $600.00 annually.

Someone please tell me I'm wrong because the implications are just too staggering for my mind to accept.    

This topic requires more attention. 

Do we have any tax attorneys in the house?

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Re: Anonymous Trading of Coins Ends in 2012

npwebb wrote:

From just a cursory read, I'm getting the impression that this would mean all businesses would need to track total annual sales to individuals and report all activity exceeding $600.00 annually.

The article says calendar year.

Starting in 2012, that changes. All business payments or purchases that exceed $600 in a calendar year will need to be accompanied by a 1099 filing. That means obtaining the taxpayer ID number of the individual or corporation you're making the payment to -- even if it's a giant retailer like Staples or Best Buy -- at the time of the transaction, or else facing IRS penalties.

I'm unclear though on who sends the 1099.  This article seems to say that a business that pays over $600 in a calendar year to one company or person  must file a 1099.  Machinehead's original posts was referring to casual coin sellers falling into this situation.  I'm not sure it means that a merchant must report sales of $600.

Does anyone know how this would really work so you can keep us from going off an a tangent?

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Re: Anonymous Trading of Coins Ends in 2012

Although I agree this is very intrusive to our private ways of money management, I don't see this causing a huge problem for people who don't have that much money to invest in coins. Lets not kid ourselves, the average joe is probably in debt and doesn't have much capital to be doing bullion or numismatic investments. Also, who is to say we cannot go in every day and just trade (buy/sell) $500 worth of coins? Thats $15000 a month. Although I can see this being very inconvenient. 

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Re: Anonymous Trading of Coins Ends in 2012

Under existing rules, if a business pays a sole proprietor (someone who reports business income on Schedule C) over $600 in annual compensation for services, then a 1099 form should be filed. There is no such requirement if the recipient is a corporation, nor is a 1099 filing required for purchases of materials.

Under Obamacare, to my understanding, all annual payments over $600 between all business entities (incorporated or not, for materials or services) have to be reported on 1099s. Most business accounting systems can produce a list of annual totals sold to each customer, and paid to each vendor. Either by manual review or with a little extra coding, a list of annual sales and payments exceeding $600 can be generated. But for any but the simplest businesses, such lists will contain hundreds or thousands of line items, whereas today there may be a handful, or a few dozen, payments to sole proprietors.

Practically speaking, there is no way that a hundredfold surge in 1099 filings can be processed or matched anytime soon. At least for small businesses, where compliance will be low initially (therefore making matching efforts a waste of time), chances are that enforcement will be mild for the first few years. But it is still unpleasant to take the risk of exposure to penalties.

The larger issue is the mentality of total monitoring. Up till now, businesses have been responsible for self-reporting their income and expenses. Now the government wants to dig into the micro-minutiae of their transactions. Both the Stasi-like prying, and the deadweight loss of an excessive documentation burden, are incompatible with a free society.

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Re: Anonymous Trading of Coins Ends in 2012

etsan-

I think this is applicable to all businesses, not just those involved in coins or bullion.  The initial article cited just happened to discuss how that will impact coin and bullion buyers and sellers.  So presumably a 1099 form will need to be filled out for any $600+ purchase.... a car, mid-to-high-end computer, large piece of furniture, maybe even that dairy cow for the farm.  Presumably this would include a sizeable number of gun purchases as well.  Perhaps it'd be a handy way of tracking gun purchases at a whim (i.e. without evidence of any crime being committed), if someone in the federal gov't were so inclined.  I can only imagine the gun sales bonanza we'd see if this reporting requirement was not killed.... it would make the pre-election 2008 gun-buying spree look insignificant by comparison.

Part of me thinks that now it's becoming public knowledge these reporting requirements will get smacked down in short order, or at least de-fanged.  As Chris mentioned there are many big players and corps who'd find this extremely costly and inconvenient.  They'll likely find a way to eliminate it or exempt themselves.

- Nick

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Re: Anonymous Trading of Coins Ends in 2012

From just a cursory read, I'm getting the impression that this would mean all businesses would need to track total annual sales to individuals and report all activity exceeding $600.00 annually.

Yes, I think that is correct.  This article gives some more insight:

Normally, you would tally up receipts for your payments to your vendors and include them in the relevant sections of your tax return as business expenses. Now, with these changes, you will have to issue a 1099 to each vendor, whether individual or corporation, from whom you purchased over $600 of goods or services during the fiscal year and send a copy of that 1099 to the IRS. This is in addition to the 1099s you had to issue previously.

You’ll also be receiving a 1099 from each business to which you sold over $600 of goods or services.

Each new 1099 will need to be reported on your tax return at the end of the year.

http://djmarcuslaw.com/health-care-bill-and-your-small-business/

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Re: Anonymous Trading of Coins Ends in 2012

nickbert,

If its for all business transactions, then there is no way they can pass this bill. For businesses that need to issue 1099s, don't they need your social security number for that? And who would be buying things from a company that has to collect your SS #? The answer is NO ONE. If this is passed, then Big Brother indeed has taken over.

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Re: Anonymous Trading of Coins Ends in 2012

Um, technically it's already passed as part of the health care bill, it just has yet to go into effect.  It could end up being nixed (either that portion of the bill or the entire health care bill itself) but at least for the moment it's on track.  Creepy and sad.

If it does continue as planned, yeah you're right you can expect a whole mess of people and businesses to be confused, angry, or just simply ignore it.  Then either the whole reporting scheme will collapse into an epic failure, or just maybe after several years consumers, business, and the IRS eventually adjust to or tune the new system.  It may seem inconceivable now that the latter could come to pass, but I'm not about to place any bets AGAINST collective stupidity and/or apathy....

- Nick

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Re: Anonymous Trading of Coins Ends in 2012

In reference to the original topic of the law that was passed in the healthcare bill...

If you were to buy gold or silver eagles, I wouldn't think that would count toward the yearly $600.  After all, you're just trading one form of US currency for another.  There's no tax when you trade two $10 dollar bills for a $20. Yes, you pay more for the gold than the $50 printed on it but it's still US currency. I would think this is the loophole that the uber-rich would use.

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Re: Anonymous Trading of Coins Ends in 2012

There appears to be two different opinions about how this will apply:

1) applies only to business to business/vendor transactions and/or

2) applies to both business to business and business to customer

The original article applied to the coin bullion industry implies that the coin/bullion dealer would be required to report all sales to individuals totally $600 or more a year.

That suggests (if the law is being correctly interpreted and applied) that all business would have to report all transactions with all customers (regardless of industry).  That is draconian. 

I'm not suggesting that that is even correct.

If it's only option 1, then it should not affect precious metal, gun, or any other purchase made by individuals.

I'm just seeking clarification.

It may be fun to speculate, but I'd really like to know if there is anyone here in the CM community with the expertise to provide some insight and get to the bottom of this.

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Re: Anonymous Trading of Coins Ends in 2012

Section 9006 of H.R. 3590 extends the information reporting requirements of Sec. 6041 of the Internal Revenue Code of 1986 to corporations, and in place of only 'wages' and 'emoluments' it adds 'amounts in consideration for property' and 'gross proceeds.'

http://www.stopform1099.org/Page%20737%20from%20PPACA.pdf

This doesn't affect transactions between private individuals. But, 

... a Form 1099 must be issued to individuals and corporations that provide property to a business.

The payments that are included under this are not only those made directly by check but also those made by other means such as credit cards, for example. Think about the airlines, hotels, rental cars, and restaurants that appear on your [business] credit card bill. You might not think of them as vendors of goods and services, but that is what they are.

http://www.stopform1099.org/

As an example -- you do some solo consulting which you report on Schedule C. You buy a computer for $1,000 from MicroCenter -- you have to get the TIN of the incorporated MicroCenter store and issue them a 1099. You buy some office furniture and supplies from Staples -- again, you have to get the TIN and issue Staples a 1099 form.

Then you have a 'cash only' handyman, who might be an undocumented immigrant, remodel and paint your office. You have to get his SSN, if he has one, and issue him a 1099 form. If the SSN turns out to be invalid, the IRS may hit you for the 30% withholding that you should have remitted to them, when paying a vendor with an invalid or nonexistent taxpayer ID number -- plus interest, penalty, and disallowance of the expense deduction.

This stuff can get expensive and ugly in a hurry. The mentality behind this law is malevolent, bloody-minded, megalomaniacal.

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