Navigating the complex world of precious metals sales and IRS reporting requirements can take time and effort for investors and collectors. The Internal Revenue Service (IRS) has specific guidelines on what constitutes a reportable sale regarding transactions involving precious metals.
However, it is hard to make a complete list of everything that needs to be reported because the IRS rules are not always clear about which coins, bars, and rounds need to be reported.
This article will explore the general guidelines and provide a detailed list of commonly traded precious metal items.
Gold
When it comes to gold, the IRS requires sales reporting, provided the gold is at least 99.5% pure.
This includes:
Gold bars of any brand that meet the purity requirement in quantities of one kilogram (32.15 troy ounces) or more of gold.
Gold rounds of any brand that meet the purity requirement in quantities of one kilogram (32.15 troy ounces) or more of gold.
Specific gold coins in large quantities (25 or more), such as:
Canadian Gold Maple Leaf coins (1 oz each)
South African Gold Krugerrand coins (1 oz each)
Mexican Gold Onza coins (1 oz each)
Silver
In terms of silver, the minimum requirement for reporting is 1,000 troy ounces or more, with a purity of at least 99.9%.
Reportable silver items include:
Silver bars of any brand that meet the purity requirement.
Silver rounds of any brand that meets the purity requirement.
Specific silver coins in large quantities, including:
Canadian Silver Maple Leaf coins (1 oz each)
Silver Krugerrand coins (1 oz each)
Other similar 99.9% pure silver coins in quantities that meet or exceed 1,000 ounces.
Platinum
Platinum sales become reportable when they involve 25 troy ounces or more of at least 99.95% pure platinum.
This encompasses:
Platinum bars of any brand that meet the purity requirement.
Platinum rounds of any brand that meets the purity requirement.
Specific platinum coins in large quantities (25 or more), such as:
Canadian Platinum Maple Leaf coins (1 oz each)
Palladium
For palladium, the reportable amount is 100 troy ounces or more, with a purity of at least 99.95%.
Reportable palladium items include:
Palladium bars of any brand that meets the purity requirement.
Palladium rounds of any brand that meets the purity requirement.
Specific palladium coins in large quantities (25 or more), like:
Canadian Palladium Maple Leaf coins (1 oz each)
Additional Specific Coins
U.S. 90% silver coins (dimes, quarters, and half dollars minted before 1965) are reportable when sold in face value amounts of $1,000 or more.
Exemptions: American Gold Eagles and Silver Eagles
Even though American Gold Eagle coins are a popular way to invest, they usually need to be reported differently than other coins when they are sold in quantities of less than 25 coins.
This is because the IRS has special rules about some coins, like the American Gold Eagle, which are legal tender and do not need to be reported when sold in smaller amounts.
According to the most recent information, both gold and silver American Eagle coins do not have to be reported by brokers on IRS Form 1099-B, no matter how many are sold.
The U.S. Mint makes these coins, which are legal tender bullion coins. They have a special status that keeps them from having to be reported in the same way as other precious metals.
Important Considerations
It is crucial to know that even if the sale of these coins does not require Form 1099-B reporting, taxpayers still need to report any capital gains to the IRS on their tax returns.
The exemption only applies to the broker’s requirement to report the deal on Form 1099-B. It does not affect the taxpayer’s duty to report gains or income.
Tax laws and regulations are subject to change, and nuances or particular circumstances could affect the reporting requirements.
Always talk to a tax professional or the IRS directly for the most accurate and up-to-date information, and ensure you follow the latest tax laws and reporting rules.
Investing in precious metals can be rewarding, but it comes with its own regulatory responsibilities. Investors can confidently navigate these obligations by staying well-informed and seeking expert advice.
Cost segregation studies have become a popular tax strategy for real estate investors looking to maximize their depreciation deductions and improve cash flow.
Investors can substantially enhance their initial tax deductions by identifying and reclassifying personal property assets to reduce the depreciation period for tax purposes.
However, this strategy has its drawbacks. In this article, we’ll explore some of the less-discussed disadvantages of cost segregation studies, including the implications of depreciation recapture, the complexities of 1031 exchanges, and the administrative challenges of filing Form 3115.
Depreciation Recapture Upon Sale:
One of the primary disadvantages of a cost segregation study is that it might affect the taxes when the property is sold. While cost segregation accelerates depreciation deductions, it also increases the amount subject to depreciation recapture.
Upon selling a cost-segregated property, the IRS mandates the owner to “recapture” the depreciation that was claimed beyond the straight-line depreciation method.
This recaptured depreciation is subject to taxation as ordinary income, with a maximum tax rate of 25%. This can result in a significant tax bill that can erode the benefits of accelerated depreciation, especially if the property has appreciated substantially.
The Boot Issue in 1031 Exchanges:
Real estate investors often use a 1031 exchange to defer capital gains taxes by reinvesting the proceeds from a property sale into a new property.
However, when a cost segregation study has been performed, there’s a risk of receiving “boot,” which is any form of non-like-kind property or cash acquired in the exchange.
The boot is immediately taxable, and its presence can complicate the exchange process. It can be hard to set up an utterly tax-deferred exchange if the property’s market value is much higher than its tax basis because of accelerated depreciation.
Even if investors plan to defer all gains through the 1031 exchange, they may have an unexpected tax bill.
Filing Form 3115 for Mid-Service Changes:
In a cost segregation study conducted after a property has been in service for a period of time, the taxpayer must file Form 3115, Application for Change in Accounting Method, to report the change in the depreciation method to the IRS.
This process can be complex and requires detailed knowledge of the tax code. Form 3115 requires a calculation of the Section 481(a) adjustment to account for the depreciation that would have been taken if the new method had been in place from the beginning.
This administrative burden can be daunting and may necessitate professional assistance, adding to the overall cost of the cost segregation study.
Conclusion:
Although cost segregation studies can provide substantial tax benefits, they also have drawbacks. Essential things for investors to think about are the significant tax bill that could come from recapturing depreciation, the difficulty of a 1031 exchange with boot, and the paperwork needed to file Form 3115.
It is essential to consider these cons and the possible pros and talk to a tax expert who can give you specific advice on your case.
By understanding the whole picture, investors can make informed decisions and strategically plan for the long-term financial impact of their real estate investments.
As a shareholder-employee of an S-corporation, understanding how to handle medical insurance premiums can be crucial for tax planning and compliance. For those who own more than 2% of the corporation’s stock, treating medical insurance premiums is unique and requires careful attention.
This article will guide you through the process of adding these costs to your payroll, discuss their tax implications, and explain how this can support your stance on reasonable compensation with the IRS.
Adding Medical Costs to Payroll
For 2% shareholders, the cost of their medical insurance premiums paid by the S-corporation should be added to their W-2 wages to tax them correctly.
Here’s how to do it:
1. Determine Eligibility:
Verify that the medical insurance premiums are for a policy that the S-corporation has established.
This policy can be in the name of the S-corporation or the shareholder, as long as the S-corporation either pays the premiums itself or reimburses the shareholder and counts the reimbursement as taxable income.
2. Calculate the Premiums:
Total the amount of the medical insurance premiums paid during the tax year.
3. Include in Wages:
For federal income tax purposes, add the premium amount to the shareholder’s W-2 wages in Box 1. However, these amounts should not be included in Boxes 3 or 5, as they are not subject to Social Security or Medicare taxes (FICA).
4. Shareholder’s Tax Return:
The shareholder can then deduct the premiums from their tax return up to the limits set for self-employed individuals with health insurance.
Tax Implications: FICA and FUTA
The inclusion of medical insurance premiums in wages has specific tax implications:
FICA Taxes:
The premiums are added to the shareholder’s taxable wages but are not subject to Federal Insurance Contributions Act (FICA) taxes.
This means that while the amount will be subject to federal income tax withholding, it will not be subject to Social Security and Medicare taxes.
FUTA Taxes:
Similarly, the premiums are not taxed under the Federal Unemployment Tax Act (FUTA). The overall employment tax burden is reduced, which benefits both the S-corporation and the shareholder.
Benefits Regarding Reasonable Compensation
Incorporating medical insurance premiums into the shareholder’s compensation can also play a strategic role in demonstrating reasonable compensation.
Supporting Compensation:
By including the cost of medical insurance in wages, the S-corporation can provide evidence of additional compensation to the shareholder. When the IRS looks into whether the shareholder’s salary is too low, this can be very helpful.
Reasonable Compensation:
The IRS requires that shareholder-employees receive reasonable compensation for services rendered to the S-corporation.
The S-corporation further supports its claim that the shareholder receives fair compensation by including medical insurance premiums in the compensation package.
Conclusion
For 2% of S-corp shareholders, properly handling medical insurance premiums is essential for tax planning and compliance.
For the S-corporation and its shareholders, including these costs in the payroll can help with tax benefits while supporting reasonable compensation.
It’s essential to follow the correct procedures to ensure that these premiums are reported accurately and in compliance with IRS regulations.
As with all tax-related matters, consulting with a CPA or tax advisor familiar with S-corporation taxation is advisable to ensure that you’re meeting all requirements and maximizing your tax benefits.
There are significant tax benefits for sellers who sell real estate through installment sales when payments are made over time (e.g., five years) compared to one-time payments.
This method gives buyers a flexible payment plan and spreads the seller’s tax liability throughout the installment payments. Here’s a concise overview of the benefits and process of installment sales.
Key Tax Benefits:
1. Deferred Tax Payment:
Sellers might prevent switching to a higher tax rate in the year of sale by paying capital gains taxes gradually.
2. Lower Capital Gains Tax Rate:
Spreading the income may result in lower tax rates over the years, especially for sellers expecting to be in lower tax brackets.
3. Interest Income:
Although taxable, interest earned on installment payments provides sellers with an extra source of income.
The Process:
1. Installment Sale Agreement:
Essential for outlining payment terms and protecting interests, this legal document should be crafted with a real estate attorney.
2.Tax Reporting:
Sellers report income on IRS Form 6252 annually, calculating the portion of each payment subject to capital gains tax.
3. Seller Obligations:
Acting as the lender, sellers must understand their rights, including foreclosure, if the buyer defaults.
4. Depreciation Recapture:
For previously depreciated business or investment properties, depreciation recapture is taxed as ordinary income in the sale year, not over the installment period.
Title Transfer and IRS Compliance:
Title transfer can occur immediately, with the seller securing the balance owed via a mortgage or deed of trust. Capital gains are still deferred, so this arrangement does not change the tax benefits of the installment sale.
However, ensuring the sale meets IRS criteria for installment sales is essential, as certain types of property (like inventory) are ineligible.
Conclusion:
Installment sales can help with taxes because they delay the recognition of capital gains and provide a steady income stream. They make it easier for people to buy homes and give sellers tax and income benefits.
Even so, because these deals are so complicated, you must talk to a professional to ensure you follow the law and pay your taxes.
Consultation Reminder:
Consult with tax experts and real estate lawyers to ensure that your installment sale plans are legal and fit your needs, so you can get the most out of them.
This summary focuses on the strategic benefits of installment sales in real estate deals, emphasizing the importance of getting professional help to navigate legal and tax issues.
Cryptocurrency has shaken the world by opening new ways to trade and do business with money. The rise of Bitcoin, Ethereum, and many other digital currencies, on the other hand, has made tax officials, such as the Internal Revenue Service (IRS), very interested in how crypto transactions affect taxes.
If you’re dabbling in the digital currency world, it’s crucial to understand how to report your transactions to the IRS. Here’s how to remain in compliance and avoid potential penalties.
Understanding the Tax Implications of Cryptocurrency
To begin, the IRS views cryptocurrencies as property for tax reasons. This means that when you sell cryptocurrency, like stocks or real estate, you may make or lose money and must report that on your tax return.
Types of Taxable Events
Here are some common taxable events in the world of cryptocurrency:
Selling cryptocurrency for fiat currency (e.g., selling Bitcoin for USD)
Trading one cryptocurrency for another (e.g., trading Bitcoin for Ethereum)
Using cryptocurrency to purchase goods or services
Earning cryptocurrency through mining or staking
How to Report Cryptocurrency Transactions
1. Keep Detailed Records:
Write down all the details of each transaction, such as the dates, amounts, and items exchanged. This information is essential for calculating profits or losses.
2. Calculate Gains and Losses:
You will need to determine the cost basis (the initial value of the cryptocurrency at the time it was acquired) and the fair market value at the moment of each transaction.
The difference between these amounts is your capital gain or loss.
3. Fill Out the Right Tax Forms:
Form 8949: This form lists all capital gains and losses from property transactions, including crypto. You’ll need to detail each transaction and whether it was a short-term or long-term capital gain or loss.
Schedule D: This form summarizes the total capital gains and losses from Form 8949.
4. Report Income from Mining or Staking:
Cryptocurrency earnings from mining or staking are subject to taxation. This must be reported on Schedule 1 (Form 1040), and if it is a business venture, it is subject to self-employment taxes.
5. Consider the Foreign Account Reporting Requirements:
If you possess cryptocurrency assets on foreign exchanges or wallets, you can be subject to additional reporting requirements, such as filling out Form 8938 (FATCA) or Form 114 (FBAR) for FinCEN.
Stay Updated on Guidance
The IRS has been making updates to its tax guidance regarding cryptocurrencies. It’s essential to keep up with new laws or adjustments to how the tax authorities treat cryptocurrency transactions.
Use Tax Software or Consult a Professional
Several tax software programs now support cryptocurrency transactions and can help you determine your gains and losses automatically.
However, talking to a tax expert with crypto experience can be beneficial because crypto tax law is complicated and constantly changing.
Conclusion
Reporting cryptocurrency trades to the IRS can be challenging, but it’s essential to being a responsible crypto investor.
You can confidently get through the tax maze if you keep detailed records, understand what events are taxable, and use the correct tax forms.
Remember to call for professional assistance when in doubt to ensure you’re fully compliant and can relax during tax season.
