Many silver investors have seen plenty of disinformation and confusion regarding the procedures for buying or selling silver bars. The regulations for taxes and government reporting of silver bar sales can certainly be confusing. Within the U.S., there are unique tax and reporting regulations for physical silver bars and coins that do not apply to other types of investments. These requirements vary depending on the transaction size, type of silver involved, and other considerations.
Some investors are worried about telling the U.S. government that they have a large stash of silver bars. If you want to avoid having to report your purchase to the government, it is important to understand the regulations about government reporting. It is usually possible to select a silver bar and payment method that does not require government reporting.
Cash Payments
In most instances, you do not have to report to the government that you’ve purchased silver bars or other types of silver bullion. However, if you pay with cash, or with cashier’s checks, money orders, or travelers checks, and buy at least $10,000 in silver bullion or coins, the seller will need to submit a form to the government. IRS Form 8300, “Report of Cash Payments Over $10,000 Received in a Trade or Business,” is required in an effort to prevent money laundering. This requirement is not specific to sales of silver bullion – it applies anytime there is a cash transaction over $10,000. Note that this form is also required if you make several transactions totaling $10,000 or more, even if each of the individual transactions is under this amount.
Sales Taxes
When you purchase silver bars or coins, you may be required to pay sales tax. This is a separate issue from the Form 8300 reporting requirement. Sales tax laws vary by state. In many states, certain types of silver bars or coins are exempt from sales tax. Note that there may be minimum purchase requirements to qualify for the exemption; it may also be restricted to certain types of silver bars or coins. By purchasing in bulk or choosing certain types of physical silver, you may be able to reduce your sales tax liability.
Reporting Silver Bar Sales to the IRS
While these requirements concern the purchase of silver bars, other requirements affect the sale of these items. The sale price, minus the initial purchase cost, is considered to be a capital gain, and is subject to capital gains tax. This sale is reported on Form 1040 Schedule D. The IRS considers silver bullion to be a “collectible,” taxed at a maximum 28% rate.
If you sell your silver bars to a precious metal dealer, they may be required to file IRS Form 1099-B. Regardless of whether or not this form is filed, the seller is still obligated to pay tax on any profits.
Silver IRA Tax Advantages
Many investors find that they can reduce their capital gains tax obligations by investing in silver bars through a silver IRA, or Individual Retirement Account. An IRA can be used to hold silver bars and other types of precious metals as a form of retirement savings. With this method, the silver bars are held in a precious metal depository. There are certain tax advantages to holding silver bars in an IRA account. Consult with a tax advisor to find out whether a silver IRA may be appropriate for your investment goals.
Before buying silver bars, make sure that you understand the reporting requirements and tax implications of the purchase.
