Federal reporting of transactions over $600 cumulative : eBay Guides

Just be aware that starting in 2011 the current IRS regulations, unless congress changes them, will require all businesses to report transactions of $600.01 or more, whether made in one transaction or dozens, will be required to be reported to the IRS on a 1099 for all transactions beginning on January 1st 2011. 

Put another way for clarification: Coin seller sells to coin buyer A five $10 face lots of 90% circulated US silver coins in five transactions at $20 per ounce during January 2011 and then three $10 face lots in April at $25 per ounce, etc., and does so periodically throughout the rest of 2011.   No problem so long as the transactions are run through credit cards, since those transactions are reported to the IRS anyway (and that's assuming PayPal is treated as a credit card and a stand-alone reporting system to the IRS).   PayPal will likely address that issue IF the law remains on the books for tax year 2011. 

Problem arises when the same seller makes direct sales from his or her store, at flea markets or coin shows and accepts cash, coins, checks or barter in exchange for coins bought and sold.   These businesses must, according to my reading of the law, exchange IRS Forms 1099 if they conduct business of $600.01 or more with each other during the course of the WHOLE YEAR OF 2011!   In order to accomplish this and remain in federal tax law compliance, each business and individual involved in such transactions must exchange IRS Form W-9 so each will have the data on it that the IRS demands or face not only a possible fine for doing so, but potentially also denial of your cost basis when or if you get caught failing to obey this burdensome new IRS regulation.

But there is another wrinkle here also.   In the past, when you paid an individual or some specific professional class (like attorneys, etc.) only those having a cumulative $600.01 or more in transactions had to be reported directly to IRS using the appropriate 1099 form.   This new law that is scheduled to go into effect 1/1/2011 DOES NOT EXEMPT even regular "C" corporations, "S" corporations or even non-profit organizations FROM FILING THOSE PESKY 1099 FORMS OR FROM BEING CAUSED TO EXCHANGE FORMS W-9 WITH EACH OTHER!  

WHAT TO DO BEFORE IT IS TOO LATE

(1) Check with your tax pro in December to learn whether the law has been retracted or remains in force for 2011.   IF the law remains on the books for 2011, then...

(2) Be prepared to track all (and I do mean all) purchases and sales beginning on the date of January 1st 2011 and thereafter on a computer system (I recommend QuickBooks Pro 2010 or 2011, but there are others) and exchange those W-9 Forms (available online at the IRS website  for download) with all customers and vendors with whom you do business BEFORE YOU DO ANY BUSINESS WITH ANYONE IN 2001.   Software like Excell spreadsheets might also work, but whatever you use must accurately record each and every purchase and sale transaction and assign it properly to each vendor and customer for year-end 2011 totals if this law stays on the books. 

(3) Non-compliance with the IRS is not a good idea and it never has been, but the consequences for being non-compliant with federal tax laws are even worse now than ever before.   Congress has demanded that the IRS vastly reduce the tax collections short fall (estimated at or about $350 billion (that's billion, with a "b") a year and has ordered compliance efforts be more aggressive (i.e.: tax liens, garnishments, prosecution for tax evasion, etc.).   Non-compliance can easily mean financial headaches, higher taxes, lost deductions from taxable income, and months or years of grief just tryng to deal with IRS Collections Division (and yes, there is a potential 75% non-compliance penalty to contend with as well when or if you get caught).

(4) Make sure that the person that handles your 2010 taxes in 2011 is either registered with the IRS or is licensed by the state as an attorney or CPA or by the federal government as an Enrolled Agent (EA for short).   Tax preparers that are not either registered as preparers or licensed as an attorney, CPA or EA as of 1/1/2011 can only get you and themselves into serious trouble with the IRS.   Ask your tax pro to explain in some detail why this item (4) is so very important to all taxpayers who have someone else complete their 2010 tax returns without being registered or duly licensed as a tax preparer.

The good news: Congress is being asked to remove this onerous burden on buyers and sellers of coins (and almost every thing else in the USA) before 1/1/2011.

The bad news: Congress is being asked to remove this onerous burden on buyers and sellers of coins (and almost every thing else in the USA) but with a "lame duck" congress in session after the November elections this year this might not occur at all either.

Be aware also that there will most likely be a severe shortage of tax preparers during the 2010-2011 tax season due to new IRS requirments for tax preparer registration or licensing with the federal government and with some states as well.   Talk with your tax pro well before the end of December 2010 and save yourself some grief.

Respectfully submitted,

Thomas Avery Blair

federally-licensed Enrolled Agent