There is a lot of confusion and disinformation surrounding whether purchases of precious metals must be reported to the government. The required paperwork itself is not complicated, though the rules can be.
Some investors are wary about letting the government know that they are buying gold. If you wish to avoid government reporting of the purchase, it is crucial to understand these rules ahead of time so that you know which purchases require government reporting.
Sales tax laws vary from state to state. Whether sales tax is due is typically determined by the state in which you take delivery of your metals. Many states have sales tax exemptions for bullion purchases.
However, there may be minimum purchase requirements in order to qualify for this exemption. If you live in such a state, it may make sense to save your money until you’re able to buy in bulk, rather than buying a single coin at a time.
Government Reporting Requirements
In addition to sales tax requirements, there may also be requirements to report the purchase to the U.S. government. In most cases, bullion and rare coin transactions are not reportable. If you pay with a personal check, credit card, or bank wire, there are no reporting requirements. If you pay with cash, money orders, cashier’s checks, or travelers checks, and the purchase price is at least $10,000, it must be reported to the government.
The dealer is required to submit IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. This document is required for all cash transactions over $10,000 in the United States, not just precious metal purchases. It requires information such as your name, address, and social security number.
Given the $10,000 price at which IRS reporting becomes mandatory, some investors try to skirt the rules by making multiple smaller purchases. This is known as “structuring,” and doing so is not legal. $10,000 in related transactions must still be reported, even if the purchases occurred in separate transactions or even on separate days. If you wish to avoid the IRS reporting requirement, consider using a payment method that does not require reporting, such as a bank wire.
There are other reporting requirements for precious metal dealers. The Suspicious Activity Report (or SAR), part of the 2001 Patriot Act, requires financial institutions (which includes coin dealers) to report suspicious transactions. However, there are no firm rules about which transactions should be considered suspicious.
In addition, coin dealers are required to comply with anti-money laundering regulations which require them to obtain the names of all customers engaging in cash transactions above a threshold dollar amount, typically set at $3,000-$5,000. Although this does not require the filing of any additional forms, dealers are required to have the information available, should the IRS request it.
What happens after the transaction information is submitted to the government? The IRS could ask questions about the transactions, although this happens infrequently. This reporting information becomes a very small part of the total information collected by the government about cash transactions. Unless the transaction is flagged as suspicious, you can reasonably expect that nothing will happen once the form is submitted.