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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!