The IRS is Watching You…

Bob Bauman (July 27, 2010)

And There’s More than One Reason to Be Concerned

Americans are already outraged by President Obama’s new health care law. And now, many are up in arms about a little-noticed provision buried deep in the 906 pages of that law.

“The 2010 Patient Protection and Affordable Care Act” (Health Care Act, P.L. 111-148) contains a sneak provision (IRC §6041(h)) that is set to directly impact you.

This law requires any person engaged in a trade or business to file an IRS Form 1099, reporting all payments totaling $600 or more in a calendar year to any single person, other than a tax-exempt corporation (non-profit).

No, they don’t care to know who donated $600 to a local animal rescue. Only that Joe Schmo sold you an old pick-up truck for $750 for your lawn service company.

He’d better pay tax on that transaction! And you are responsible for getting him the forms and, at the same time, submitting them to the IRS.

And when you mail off your rent check for your equipment bay, guess what…

Time to send the old 1099s to the IRS and your landlord.

But that’s not all!

Even corporations are affected.

That’s right. That John Deere lawnmower you just bought? Again, you’ll need to mail a 1099 to the IRS and John Deere.

Until now, IRS 1099 forms have been used to track and report miscellaneous income paid for services of independent contractors or self-employed individuals.

Under current U.S. law, payments to corporations — except those for medical or health care services — are not required to be reported to the IRS. Now almost all corporations will be affected.

Small Businesses Outraged. Rightfully So.

Pat Heller, owner of Liberty Coin Service in Lansing, Mich., is mad, according to ABC News. He said, “I’ll have to hire two full-time people just to track all this stuff, which cuts into my profitability.”

And you know what less profitability means for the IRS?

Less tax revenue.

Just think for a minute about every financial transaction between businesses and individuals or other businesses which exceed $600…

That’s a whole lot of paperwork!

Hard on small business, hard on big business. That translates to, “hard on the economy.”

Is this really the time to be creating extra hassles for small businesses struggling to stay afloat?

Every U.S. business, and individuals as well, will be forced to obtain the tax ID number and/or the Social Security number of everyone with whom they do more than $600 worth of business in a year.

It takes effect on Jan. 1, 2012 — and it applies to all U.S. business and private transactions.

Based on 2009 IRS data, about 40 million businesses and other entities will be subject to this 1099 debacle, at greatly increased cost and trouble.

There’s only one word to describe the paperwork and reporting requirements: Draconian.

Small-business owners are already complaining that the time and effort it will take to obtain this documentation will be a drag on business. That’s assuming that a lot of small transactions aren’t driven to the black market!

America: Land of the … Tax Evader

This provision is based on the IRS’s unproven belief that millions of Americans are evading taxes.

The bureaucrats’ idea is that IRS computers can process hundreds of millions of Form 1099s, comparing them against each buyer’s Form 1040, to see if reported income and purchase numbers match.

Of course, this onerous restriction was never explained during the health care debate in Congress — and if it had been it would have likely been defeated. But that’s what you get when you can’t determine what’s in a spending bill until it becomes law. Shame on Congress.

This is yet another example of legislators using sneak provisions in an inches-thick bill to impose policies that would otherwise have been rejected. The same tactic was used in March when the “HIRE Act” was adopted containing a potential 30% tax on offshore banking transactions by U.S. persons.

An exercise in total fiction: Sponsors claimed the Form 1099 provision will expose what the IRS thinks is a vast ocean of uncollected income taxes … and will supposedly help to pay the trillions the health care law will cost.

Without any proof, they predict the 1099 requirement will raise $17 billion over the next 10 years.

And this was the law that Obama insisted would impose no new taxes.

But Now for the Really Scary Part…

Precious metals such as coins and bullion fall into this new 1099 category and U.S. coin dealers are among those most outraged by the new law.

And it’s on privacy buffs’ and freedom lovers’ radars for another reason.

Those who remember history recall that Americans’ freedom to own gold (except for jewelry, dental, and numismatics) was made illegal after 1933, when President Franklin D. Roosevelt issued an executive order prohibiting gold ownership.

Those who value their right to own gold note the obvious:

The 1099 reporting rule will tell IRS agents who owns gold and where they live.

Will this administration confiscate your only “sovereign currency”?

It remains to be seen. But here’s what you can do to protect yourself now:

Andrew Packer’s Pre-2012 Solutions

Are there any legal ways around this new attack on privacy and personal freedom?

MySwissGold.com is an example of what the “HIRE Act” calls a “foreign financial agency.” It is now a reportable account, unfortunately.

The act defines a “financial agency” as “a person acting for a person as a financial institution, bailee, depository trustee or agent, or acting in a similar way related to money, credit, securities, gold, or in a transaction in money, credit, securities or gold.”

Perth Mint Certificates, depending on the terms upon which they are purchased, may constitute “an account” under U.S. law and in that case they are reportable on Form 1040 and Form TDF22 annually if they are valued at $10,000 or more during the calendar year.

On the other hand, gold you store yourself in a safety deposit box or private vault to which only you have access doesn’t appear to be reportable — yet.

Fortunately, as this provision doesn’t go into effect until January 2012, you have more than a year to “stock up” on gold and silver bullion.

I’d suggest acting fast — the metals are typically in a slump through Labor Day, after which gold demand picks up.

For gold, purchase one-ounce coins, such as Maple Leafs and Eagles.

For silver, the best buy remains “junk” silver, old pre-1964 U.S. coinage that’s already been melted into small amounts.

And also consider purchasing numismatic coins if you’re concerned about concentrating your wealth as much as possible.

There’s still more than a year for this provision to be replaced, possibly by a friendlier Congress in 2011. But regular additions to your gold and silver bullion stockpile today will alleviate a potential headache of paperwork tomorrow.

If you’ve been making excuses to put off your purchases of gold and silver, Congress has just given you the best reason to take action and protect yourself today.

Bob Bauman
Legal Counsel
The Sovereign Society

P.S. Numismatics offer a collectible form of metals which were not confiscated in 1933. And Andrew has researched one which is being offered to A-Letter Readers as a special “sneak peek” first chance before going public August 1st.

There are just a few days before the very limited supply will be offered to the public at large. I encourage you to click here now to decide if this opportunity is right for you.

Tags: assetprotection