The Form 1099 reporting requirements are part of the new U.S. health care legislation. Starting in 2012 precious metals dealers in the U.S. will have to report to the IRS on 1099s all purchases of $600 or more from clients in a single year.
Just to be clear, Form 1099 is completed not when you buy gold from a dealer, but when you sell gold to a dealer.
First, this is going to be a nightmare for gold dealers, who will be faced with a ton of new paperwork to do.
But what about individuals who go in and sell the occasional gold bullion coin or bar?
Well, first the IRS will have a record of the transaction. So you won’t be able to conveniently forget about any profit you made on the transaction for income tax purposes. And you had better have kept a copy of the paperwork you received when you purchased the gold.
Next, the dealer is going to have a sheet of paper which includes your name, home address and Social Security Number.
Maybe you know and trust your gold dealer, but do you know and trust his or her assistant, bookkeeper of office cleaner?
The point is, as soon as you hand over that completed form, the privacy and safety surrounding your ownership of gold evaporates.
If someone sees you just sold some gold, it doesn’t take a rocket scientist to figure out that you might have some more back at home. And if they also have your home address, well…
Everyone who owns gold and stores it at home goes to a lot of trouble to keep that information private. Storing gold at home can be safe, but only if the knowledge is kept secret.
But it looks like the reporting requirements of Form 1099 will remove your ability to prevent other people learning about your ownership of gold.
It’s not law yet, but it will be in 2012 unless it is challenged and overturned.
If it does pass into law, you might want to think a little more about owning your gold through allocated gold storage, and not keeping it at home.