Gold can cause much confusion regarding IRS reporting requirements, however there are a few key indicators which will ultimately decide whether you must report your purchase of gold to them.
Your purchase of gold will depend upon many variables: its amount, payment methods and timeline for purchase are all essential considerations. For further assistance and insight into your individual situation, it would be wise to speak to a tax professional.
Sales Taxes
As a general rule, gold purchases over $50,000 do not need to be reported to the IRS; however, if making large cash purchases of precious metal coins or bars it is essential that you track these transactions so as not to incur taxes for any unreported transactions.
One of the major aims of reporting requirements for precious metals is to detect money laundering schemes and track purchases and sales by monitoring 1099-B forms submitted by dealers.
Therefore, any profits earned from gold sales are subject to capital gains taxes. In order to minimize your capital gains tax burden when selling investments such as gold bars or coins, be sure to hold onto them for at least 12 months before selling.
Capital Gains Tax
Gold bullion bars and coins are considered collectibles by the IRS and therefore fall under long-term capital gains taxes.
Internal Revenue Service (IRS) tax capital gains on physical gold at 28%. This rate is considerably higher than profit from investments held over one year such as stocks which typically incur tax at 20% or below.
However, investors can ease their tax liabilities by spreading out their gold purchases in categories that correspond with how long they plan on holding onto it before selling.
If you purchase gold through a Sprott Physical Bullion Trust, an IRS Form 8621 Qualifying Electing Fund election could enable you to avoid capital gains tax and significantly decrease your tax bill.
Reporting Requirements
Many have the belief that anyone purchasing more than $10,000 worth of gold must report it to the IRS; this, however, is only partially accurate.
Reporting requirements were first established by the National Treasury in the 1980s to monitor large commodity exchanges within the US and detect any potential money laundering schemes that might threaten our economy.
As part of their reporting requirements, precious metal dealers must submit Form 8300 when customers pay them in cash for gold or silver purchases – this includes payments made using money orders, cashier’s checks, traveler’s checks or credit cards.
Tax Implications
The IRS does not regulate how much gold you can purchase or sell; however, they require any precious metal sales be reported to them.
The Internal Revenue Service identifies physical gold investments as collectibles and tax them at a maximum capital gains tax rate of 28% if held for over one year, which is much higher than regular asset classes such as stocks which typically incur taxes of 15%-20% if held longer.
As such, investing in physical gold and holding it long enough to take advantage of favorable tax treatment is absolutely critical. A great place to start would be with purchasing Sprott Physical Bullion Trusts.
These trusts, domiciled in Canada and classified as Passive Foreign Investment Companies (PFICs), qualify for favorable tax treatment. Investors are able to make annual QEF elections for each trust by filing IRS Form 8621 – these investments may offer significant tax savings over ETFs that invest in gold.
