New $600 Requirement
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Have you heard about the new 1099 requirement for businesses that was hidden in the Health Care legislation?
In the past, businesses had to report payments to individuals, in lieu of W-2 forms, for services rendered in excess of $600 per year. Financial institutions, such as banks and stock brokerage firms, also used 1099 forms to report interest or dividends they paid to individuals during the taxable year.
Now, with this new law, businesses will have to report any payments over $600 for goods in addition to services. For example, this includes utility bills, telephone bills, office supplies and any other expenses that equate to $600 or more during the year.
You may have also heard on the news and in print that coin dealers are especially concerned about this new requirement. They frequently buy from and sell to many individuals and businesses throughout the year. The amounts per invididual or business frequently will be greater than $600 in the year to an individual or business.
Rather than belabor the point from the dealers’ perspective, let’s think about this from an individual collector and investor’s view.
To refresh your memory, this is what a 1099 looks like:
The gray arrows point to information about the payee. There must be a tax identification number. This can be a Social Security number or it can be a Tax Identification Number. Most individuals would only have a Social Security Number. In addition, the payee’s name and address must be on the form.
“What’s the big deal. This is the dealer’s problem not mine,” you’re thinking.
Are you sure?
What if you want to sell a coin or several coins? Maybe you want to upgrade your collection, cull out some of the lesser coins and use the funds to buy nicer specimens. Or, maybe you invested in gold or silver and want to translate some or all of it back into cash.
Anytime you sell any of your collection, the buyer (the dealer) will have to collect the information noted on the 1099 from you.
“Oh but, I’m only going to sell coins less than $600.”
But, how will the dealer know that you won’t sell him more at a later date within the same year for a total greater than $600? He doesn’t know. Therefore, he will need to maintain the paperwork for every purchase or face IRS penalties.
You’re still thinking, “OK, but this is still the dealer’s problem, not mine.”
Are you sure?
Anytime you provide your Social Security Number to someone, especially someone you don’t know or don’t know how trustworthy all of their employees are, you endanger your identity.
Identity theft causes many problems and takes significant time to correct.
This new requirement makes people vulnerable – especially numismatists and investors.
Criminals already focus on collectors with their various theft schemes. This new legislative reporting requirement gives these villains another avenue to explore and exploit for their nefarious plots.
The good news is that some legislators in both the House and the Senate are trying to repeal this requirement. However, they face stiff competition.
Several dealers are already discussing getting out of the business if this requirement is not repealed.
From a collector or investor’s view, you should let your representative and senator know that this requirement endangers your information and your hobby.
Today’s post is brought to you by: GovMint.com-2010 Coins Now Available! Click here!
Another Cautionary Tale
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Years ago, more than I care to count, a high school history teacher asked for a show of hands of those who believed people were inherently good. She was dismayed that I chose not to raise my hand in response to her question. As a result, I was chastised for thinking bad of people.
Now, I don’t really believe people are, at their core, ruthless and corrupt. On the other hand, being somewhat of a skeptic in nature, I prefer to hesitate and learn more before trusting people unquestionably.
President Reagan’s comment, “trust, but verify,” applies much more appropriately than that long ago high school history teacher’s right-versus-wrong-with-no-shades-of-gray question.
OK, so what does this discussion have to do with coins?
Well, it seems, once again, someone trusted a coin seller on the internet (Craig’s List) only to receive a counterfeit coin in return for their payment.
This coin was a beauty – a 1901 New Orleans Morgan dollar graded MS-63 in a PCGS certified holder.
As a professional organization, PCGS offers a cert verification service on their web site for customers to research and verify PCGS slabbed coins. One simply enters the certification number from the slabbed coin, and the PCGS web site returns information about the coin. They provide general information about the coin’s characteristics including denomination, date, mintage and mint facility. Plus, they provide details about the coin such as the grade, the PCGS coin number and the estimated value of the coin.
If there is a picture of the coin on the internet and the buyer used the PCGS web site to verify the coin, why did they still get bamboozled into buying a counterfeit coin?
Have you ever noticed that some criminals are very smart and go to great lengths to deceive people into buying counterfeits? Frequently criminals go to greater lengths than would be necessary in an honest undertaking.
In this case, the criminals purchased the real 1901-O coin that PCGS graded and placed in their protective slab with the PCGS identifying numbers, hologram and bar code certifying the coin. The criminals then duplicated their real 1901-O coin along with the PCGS holder and information. Their copies will be sold as many times as possible before the certifying numbers become identified as likely being a counterfeit coin in numismatic circles.
The 1901-O dollar is a nice coin but not terribly expensive. Therefore, people will get angry at receiving a counterfeit coin, but they will decide the time and cost to chase the criminals will be more than the money already lost on the counterfeit coin. Had the counterfeiters copied a much higher value coin, people would pursue the criminals more diligently.
When buying coins on the internet, choose to purchase from reputable dealers. Yes, we would like to think everyone is trustworthy and above reproach, but the internet makes it too easy for criminals and less-than-honest individuals to take advantage of unwary buyers.
As President Reagan cautioned, “Trust, but verify,” especially when parting with your hard earned money.
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Bait and Switch
Normally, you hear about bait and switch tactics being used by merchants. However, in the coin collecting world, bait and switch can be used by customers as well.
What is bait and switch?
In general terms, bait and switch occurs when a merchant advertises a great deal on one or more products to interest buyers. When customers attempt to purchase this great deal, the merchant is out of the special but has an alternative you can buy. The alternative may be more expensive or it can be lesser quality, either way, the merchant gains a bigger profit margin.
The “baiting” grabs your interest; the “switching” provides greater benefit to the seller.
Now, you’re thinking, “How does this work with the customer doing the baiting and switching?”
Well, it’s simple really, and it’s frustrating, too, for the sellers.
Let’s look at an example between Dealer Jim and Numismatist Bill. Jim can be a large dealer with a store and staff, or he can be an individual seller on eBay. Bill, the buyer, can be another coin dealer buying long distance from Jim, or he can be an indivdual collector.
Either through the internet or other marketing vehicle; for example, cable TV shows or coin magazine ads; Bill buys a coin from Jim. Per the agreement, Jim ships the coin to Bill.
Time passes, Bill decides he is unhappy with the coin and returns it to Jim. Upon receipt of the coin, Jim notices the packaging is different from what he sent Bill. Looking more closely, he notices the coin is not the same coin.
In some cases, Jim confronts Bill with the fact that the returned coin is not the same as the one sent. In other cases, he puts Bill on the “do not sell to this person” list. And, in still other instances, Jim takes the fight public (in chat rooms and forums) to alert others to Bill’s perfidy.
Jim’s actions depend on the situation. Is the dollar value lost worth the cost of the time to fight the issue? The Bills of the world gamble that the Jims will just let it go. But, sometimes, the Jims of the world get fed up with the Bills and fight the good fight to get either their coin or their money back.
If you are a buyer and do this bait and switch with coins, shame on you. Remember the adage, “What goes around comes around.”
If you are a seller, technology helps you especially with small quantities. Yes, the effort adds time to the process, and whether you do it or not depends on your risk tolerance and how much you’ve lost in the past.
What technology? The digital camera.
Before Jim sends the coin to Bill, he takes pictures of the coin, obverse and reverse, and of the box and certificates. He copies the photos to his computer and names the files with identifiers pertinent to Bill, the coin and the date. He can include these pictures with the coin in the shipment to Bill, he can send Bill the pictures via email, or he can note the filenames along with a short description of the pictures on the packing slip to Bill. In all cases, Bill is aware that Jim has photos of the coin.
The deceit of the Bills of the world exists. Sometimes the extra effort to stop them, either before or after they try their dishonest tricks, just isn’t worth it. Other times, the extra time and effort of preventative measures can save you from a large loss.
Continuing the Cautionary Tale
Do you think slabbed coins – those coins from grading services in protective holders – cannot possibly be counterfeit?
Think again.
Generally, grading companies assign a identifying number to each coin they grade. Several grading companies also include a bar code and a holographic label. Grading companies design their holders to maximize viewing the coin while protecting it in a sealed environment.
Look at this link for a list of grading companies along with example pictures of their holders. Make sure you also look at pages 2 and 3 where they list out-of-business companies and do-it-yourself slabs.
In all likelihood, counterfeiters buy legitimate slabbed coins and spend time copying those specific coins along with their holders and labels. Of course, if one researches the identifying number of the coin, it will be listed and in some cases even include photographs on the grading site.
What’s the saying? “The best defense is a good offense.”
Educate yourself as the start of your offensive strategy.
Make sure you know the various slabs from the variety of grading services. Go to their web sites to view their slab information. If available, read what each grading service is doing to counteract the counterfeiters and to educate numismatists about invalid copies of their graded coins.
Though not the recommended way to learn in this case, experience remains a great teacher. Read the forums, talk to other numismatists, ask coin dealers and learn from people who mistakenly bought counterfeit coins or know about the experiences of other people who did.
Both NGC and PCGS include articles and helpful tips about counterfeit slabs. Plus, on the upper right corner of the PCGS page, you can enter “counterfeit slab” in the search field. The search results contain many forum comments about counterfeit slabs.
Just think of all the information you will learn as you educate yourself against the counterfeiters!
A Cautionary Tale
Among the coin dealer community, comments occur more and more frequently about people coming into their shops presenting coins they want to sell that were purchased on eBay. Unfortunately, the coins are counterfeit.
Due to the current popularity of gold, and to a lesser degree, silver, many of the counterfeit coins replicate popular gold and silver coins. As technology advances, the counterfeit process becomes more difficult to detect at first look. Some coin copies contain the right metal, just not enough of it. Others have gold plate over a non-precious metal. Still others have minute, but telling, signs that to an expert indicate the coins are not real.
Now, this is not to say that every coin presented on eBay is counterfeit. Many ethical coin dealers use eBay as a sales channel along with many ethical numismatists.
However the anonymity of the Internet makes it much easier for counterfeiters to take advantage of the unwary and to prosper with their illegal activities. (Take a look at our article Buying Coins on the Internet.)
Another important point to remember, other countries do not have the same counterfeit laws as we do. This means the counterfeiter can legally make and sell copies of US coins on the global realm of the Internet. However, those counterfeit coins will not be valuable, and not worth what you paid for them, in the numismatic or investor market.
Regrettably, the eBay rules, identified with good intentions to protect both the buyers and the sellers on their system, make it difficult for the ethical buyers and sellers to get coin counterfeiters removed.
What can you do to protect yourself?
Well, perhaps the easiest, though not the most practical, is not to purchase any coins via eBay or the Internet. That seems drastic considering the many ethical Internet coin marketplaces. However, coin shows and coin shops offer the opportunity to view coins closely with your own eyes, and a loupe if you desire, before you purchase the coins.
The next option requires research – lots of research – to determine the reputation and ethics of the coin seller. First, you can research the internet to see what, if any, comments people have made about the seller. But, be careful here, too. The Internet allows people to make comments either true or false. That’s why you need to do lots of research.
Ask other numismatists, such as coin club members, if they have bought anything from the seller. Visit coin forums on the Internet and ask what people know about the vendor.
Check the seller’s memberships in the coin collecting community.
Determine if they are a member of any best business practice groups, especially those on the Internet.
What if you cannot find much information, and you still want to pursue the coin that interests you?
Determine your risk tolerance. Are you willing to gamble the money for the coin? It is gambling in that you don’t know if you will receive value for your money or a counterfeit.
If the value is beyond your risk comfort zone, but the coin calls to your collector gene, purchase a coin of lesser value from the seller as an experiment. This won’t prove beyond a shadow of a doubt that the seller is ethical, but it will give you an example of their wares.
Basically, the Internet offers many wonderful opportunities in the comfort of your own home. But, you need to be constantly vigilant for possible bad experiences and loss of money as well.
Counterfeit Collectibles
Among the dealer community, frequent comments occur about how the counterfeiters, usually in China, are improving their techniques making it imperative that dealers be always on guard for the counterfeit coins.
The good news is the dealers educate each other and can still identify the counterfeit coins. The bad news is if you are a collector, and perhaps are not as familiar with the issues, you could easily be scammed on ebay or other sources.
In one counterfeit scenario, the counterfeiters started making AU (Almost Uncirculated) coins. They probably thought an AU coin would not raise as much suspicion and be easier to proliferate among the collector community. But, though they could make the obverse and reverse in AU condition, the rim wear did not match – too perfect for the other fake wear on the coin.
In another situation, the counterfeit coin in a PCGS holder appeared real, however the obverse and reverse did not match. Yes, they were from the same type of coin, but when reviewed closely, the unique details on the obverse did not match the unique details on the reverse. Now, did someone cut two “bad” coins and meld them together to make the one good one? Or, did someone use two different coins to counterfeit the front and back dies for the fake? If the second scenario, there could be other coins with this same problem. Oh, as for the PCGS holder, it was fake as well, but it could certainly fool the unsuspecting.
These examples are not meant to scare anyone. In any situation, you need to be alert to scams and scam artists. It’s amazing how much effort and time the scam artists apply to defrauding people when they could make an honest living with less effort and risk. But, our biggest threat still comes from China. They do not view counterfeiting collectible coins as a crime.
If you are an experienced and passionate collector, you know your coins. With the counterfeiters improving their techniques, you need to be more alert to potential problems. Even the experienced can be taken by the con artist if you are not always careful. That also means you need to be alert when buying from trusted sources. They are fallible and could be victims as well.
If you are a new collector, do your homework and ask questions of experienced people. Numismatics continues to be rewarding in many ways.
Do you social network?
Have you joined the social networking craze? That is, do you use Facebook, MySpace, LinkedIn, Twitter or any of the other social networking sites? Or, perhaps you’ve joined a few chat rooms or forums to discuss a variety of topics that interest you, maybe even discussing coins and your collection.
Social networking sites can be fun and can keep you in touch with family, friends and business associates who you do not see frequently. Some social networking sites target interactions with family and friends while others are more for business relationships. Some straddle the line and are used for both pleasure and business.
In addition to being a fun way to keep in touch, social networking sites enable you to contact like-minded people - people who have the same interests you do. Plus, chat rooms and forums attract experienced and knowledgeable people along with beginners and greenhorns within specific subjects or interests.
On the other hand, your social networking fun should be tempered with caution especially in discussing and sharing information about your coin collecting interests. Mainly, you want to be cautious in whom you trust and how much personal information you share.
Even on the social networking sites with a level of security where you “approve” your friends or network connections, weaknesses occur. You never know when a friend or family member will show someone - voluntarily or inadvertently – information you have shared in what you thought was a private area. Then that unknown someone could ask a few innocent sounding questions of your friend or family member and learn enough about you to target you for a crime.
On forums and in chat rooms, you encounter knowlegdeable people and build a rapport with them given your shared interests. However, just because they are knowledgeable and helpful does not mean they are trustworthy. Unfortunately, the anonymity of the internet allows criminals to build trust using their expertise and neighborliness. Hiding within the internet, you do not hear or see their speech patterns, facial expressions and body language, all of which we subconsciously use to judge trustworthiness in the people we meet.
The internet provides so much good information and allows you to interact with people and to research your coin collecting interests easily from the comfort of your home. But, that comfort may provide you a false sense of security.
Many companies work hard to provide protection for you and your information while you surf the ‘net, but the criminals seem to stay one step ahead. Or, if they fall behind, it’s just a matter of time before they leapfrog the security companies.
Remember the saying, “The chain is only as strong as its weakest link?” While surfing the internet, the security of your information depends on the strength of the “weakest link.” But, there are so many weak security “links” that are beyond your control and beyond your knowledge.
Now, the Negative Nellie steps aside…
You should enjoy the internet - enjoy researching and discussing coin collecting on the social networking sites. Just use caution in what you share even when interacting with people you know. Remember, some nefarious character could be lurking where you can’t see them, or more important, where you wouldn’t even think to look for them.
Oh, and one last comment, just because you learn something via the internet, don’t believe it until you’ve verified it using several reputable sources. The internet is a great place for information, but that information could be just as easily wrong as right.
Counterfeit Coins
Today, with the internet making coin buying and selling a global enterprise, coin collectors and investors need to be careful of counterfeit coins.
Coins from unknown sources can easily be either good or bad copies. Some people have bought coins thinking they are legitimate simply because they were in respected grading house holders. Unfortunately, the holders along with the registered identification numbers are being copied too.
As an example, gold counterfeit coins can be gold on the outside but another metal on the inside. Frequently, the weight of the coin will be off letting you know that the coin is fake. The problem is you don’t know the coin is fake until you receive the coin and your credit card has been hit with the charges. You can fight the charges with your credit card company in a long, drawn out process. But, what if it’s a good fake? Credit card companies have time limits on contesting charges.
Perhaps if the counterfeiters’ punishment was as strict as that of King Frederick IV of Norway in the 1720s, today’s fake coins would not be as common.
Henrik Christofer Meyer was King Frederick IV’s mintmaster in Norway. During the years 1723-1727, the mintmaster added more copper and less silver to the coins he minted. Instead, Meyer pocketed the silver. Though the mintmaster claimed the coins were counterfeits from Holland, the comparison of the coins to the dies used by Meyer showed the coins came from his work at the Kongsberg mint.
Having been found guilty, Meyer was to lose his life, his honor and his property, but King Frederick IV chose to spare his life. He ordered Meyer to be whipped, branded and sent to labor and life emprisonment at Akershus Fort. Meyer died at age 40 with bleeding wounds on his back from the whip and the branded imprint of one of his coins on his forehead.
If today’s counterfeiters had to worry about the sting of the whip and the burn of the coin branded into their forehead, they wouldn’t be so quick to make fakes to sell as originals and to scam trusting souls of their money.
As for buying coins on the internet, make sure you are buying from a dependable source. There are many legitimate dealers operating internet stores. If you find a coin you want to buy but do not know the source – research and learn everything there is to know about them. But, one thing to remember is, “If the deal sounds too good to be true, it probably is too good to be true.”
Better safe than sorry these days….
Click here =>More information about Mintmaster Henrik Christofer Meyer and Norwegian coins The web site contains other interesting coin information from the University of Oslo’s Coin Cabinet Exhibition.
(Thanks go to James Rollins who mentioned Henrik Christofer Meyer in his new book, The Doomsday Key. He is a very interesting author with the facts he includes as strange and challenging as the fiction woven around those facts.)
Potential Coin Fraud
Some people decide defrauding others is easier than earning their way honestly. In difficult economic times, more people go the dishonest route. Recent articles discuss the coin telemarketers in New York who targeted senior citizens with their scams.
As you pursue your coin interests – whether collecting or investing – be alert and aware of potential scams.
For more discussions of the coin buying scams and what you can do to be more alert, click here =>
Numismatic News Article: Rare Coin Investment Fraud Happens
A Consumer Alert for Potential Coin Fraud
Enjoy collecting and investing in coins, but as with any efforts today, just be cautious that not all people are honest – even if they seem to be.
