Chile Forum

Beginning in 2012, under a little discussed mandate of the health care reform legislation, businesses will be required to report all payments in excess of $600 for services or merchandise to the Internal Revenue Service on a Form 1099.
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Under current law, businesses send Forms 1099 for payments in excess of $600 for rent, interest, dividends, and non-employee services when these payments are made to entities other than corporations. Payments made to a corporation and payments for merchandise are not required to be reported.

In order to file the required 1099, a business would have to get a Taxpayer Information Number (TIN) from the vendor. Under current tax law, one copy of the form is sent to the IRS, and another copy is sent to the person to whom the business made the payments.

The reporting requirement will affect business in two ways, according to The Boston Globe. First, most of a business’s revenue now will be reported to the IRS by the businesses that paid it, so understating large amounts of revenue will be more difficult. Secondly, it will force businesses to identify the recipients of their business expense payments.

“There is no doubt this will be an administrative nightmare for many businesses in the first year or two,” Jamie Downey, partner at Downey & Co. said in The Boston Globe. “Have a large business-related meal at a restaurant, this will need to be reported on a 1099. Spend a week in a hotel in Waco, Texas; you will need to send a 1099.”

Those already outraged by the president's health care legislation now have a new bone of contention -- a scarcely noticed tack-on provision to the law that puts gold coin buyers and sellers under closer government scrutiny.
The issue is rising to the fore just as gold coin dealers are attracting attention over sales tactics.
Section 9006 of the Patient Protection and Affordable Care Act will amend the Internal Revenue Code to expand the scope of Form 1099. Currently, 1099 forms are used to track and report the miscellaneous income associated with services rendered by independent contractors or self-employed individuals.

While the legislation implies that taxation of such transactions to generate additional revenue is the goal, precious metals buyers, who generally like to remain anonymous, will most certainly see that the real issue in this instance is not taxation, but the ability to track who owns the gold.

When the US government ran into money problems in the 1930’s, Franklin Roosevelt confiscated all gold held in the hands of the public, and those who refused to give up their gold were either fined or imprisoned. Incidentally, the communists in Russia and eastern Europe did the same thing throughout the 20th century, but those penalties went a bit further than just imprisonment.

With a US dollar currency crisis and a US federal government debt crisis looming, many precious metals investors are concerned that similar government action may be instituted in the future.

Though it has been argued by many that confiscation in the US would not be necessary or feasible, the 1099 legislation certainly makes it easier to identify who has the gold.

Of course, those who purchase prior to January 1, 2012 will be “off the books,” until that time when they attempt to sell their gold to a registered dealer who will be required to log the transaction.

There’s a reason economist Marc Faber advised clients that they should hold their gold outside of the US.

Historically, when the economic or political shit hits the fan, governments have always moved to seize precious metals from the citizenry. The Nazis did it in World War II. The US did it in the 1930’s. The Bolsheviks did it in 1917. Rome did it by removing 90% of the silver from their coinage.

It is conceivable that, because of global economic problems, governments like the US, China and EU may once again make a move to “repatriate” the gold belonging to their citizens. Even if this is avoided, the tracking capabilities that have been provided for in the Obama health care legislation now give the government the ability to know exactly who buys how much gold, as well as an easy tracking mechanism for taxing the transaction. Rather than confiscating your gold, they may simply tax your profits at 95% at the point of sale, virtually wiping out the very reasons for why an investor buys precious metals to begin with.

And of course, for those without the ability to invest internationally, buy off the books while you still can and keep your gold out of sight of potentially prying eyes. Once the $600 reporting period begins, be sure to change dealers regularly, as the $600 is a yearly accrual based on the social security number or federal EIN. The other option after January 1, 2012, of course, is to keep your purchases and sales under $600. This can be achieved with fractional gold coins (though the price of gold may rise significantly taking these above the $600 threshold as well) or one ounce silver coins which trade for significantly less than gold.

President Obama's finance team is recommending a transaction tax.
His plan is to sneak it in after the November election to keep it under the radar. This is a 1% tax on all transactions at any financial institution i. e. Banks, Credit Unions, extra. Any deposit you make, or move around within your account, i. e. transfer to, will have a 1% tax charged. If your pay check or your social Security or whatever is direct deposit, 1% tax charged. If you hand carry a check in to deposit, 1% tax charged, If you take cash in to deposit, 1% tax charged.This is from the man who promised that if you make under $250,000 per year, you will not see one penny of new tax.

Offshore Investments: What's Reportable...and What's Not
Despite the ongoing efforts of the Obama administration and Congress to shut down any tax advantages of investing offshore, you can still achieve substantial non-tax advantages by investing outside the United States. These include:

Access to investment and business opportunities not available in the United States.
Protection from the falling U.S. dollar.
Reduced portfolio risk.
Protection from professional liability and other claims
Increased privacy.
Investment continuity in the event of disruptions in U.S. markets.
The ability to create a financial lifeboat for individuals and families threatened by totalitarian governments.

But along with the opportunities comes the responsibility to comply with Washington, D.C.'s increasingly militant attitude toward all things offshore.

The centerpiece of the anti-offshore vendetta is to require Americans to disclose more information about assets they have offshore. And given the heavy penalties for non-disclosure, not complying is a very high-risk option.

What's reportable? What's not? What are the reporting deadlines? If you invest offshore, you need to know the answers.

Here's a summary of the reporting laws for offshore investments:

A law called the Bank Secrecy Act (which effectively ended bank secrecy in the USA) requires you to file a report each year acknowledging any "foreign bank, brokerage, or 'other' financial accounts" you hold.

There are three separate reporting requirements:

1. You must acknowledge foreign accounts with an aggregate value exceeding $10,000 each year on Schedule B of your federal income tax return.

2. You must file an obscure form with the cryptic name "Form TD F 90-22.1" with the U.S. Treasury Department each year. This form is also called the "foreign bank account reporting" or "FBAR" form. Information requested on the FBAR includes how many foreign accounts you hold, their maximum value, the name of the financial institution where the accounts are held, the account numbers, etc.

3. If you hold more than $50,000 of assets outside the United States, a special reporting regime becomes effective in 2011, and will apply to your 2010 tax returns.

Fail to comply with these requirements, and you could face a negligence penalty of US$10,000. If you "willfully" fail to file the FBAR, you face a fine up to US$250,000, imprisonment up to five years, or both. Penalties are doubled if you violate any other U.S. law.

Is it Really a Foreign Account?
Unfortunately, it's not always easy to figure out whether you need to file the FBAR form or not. If you have what most of us think of as an "account" at a foreign bank or brokerage, it's clear you must file the form. But even using the published guidance from the IRS, it's less clear whether you must disclose details of other offshore relationships.

Obviously, if you can legally and unambiguously avoid reporting your offshore account or accounts, you should protect your financial privacy by not reporting them. But in recent months, Congress, the Treasury Department and the IRS have moved to expand the definition of what constitutes a “reportable” foreign account.

That makes it more important than ever to have a clear-eyed indication of what’s reportable, and what’s not.

Why you may need to file more than one FBAR for each offshore account you hold

Whether precious metals certificates and electronic gold accounts are reportable

Types of assets you can still legally hold offshore without reporting them…

The other day we reported... that hidden in the pages of the recently passed healthcare bill was a section stating that starting on January 1, 2012, all companies will have to file a 1099 for every transaction that exceeds $600, which would create a reporting nightmare for thousands of companies and absolutely crush small businesses.

Well, there are a couple equally shocking provisions hidden in the new financial reform bill that are just now coming to light.

Under the new financial regulatory law, the SEC is now exempt from Freedom of Information Act (FOIA) requests. So if the SEC screws up, like it did in the Madoff case and countless others, and you file a FOIA request to find out what went wrong, the SEC is under no obligation to comply.

President Obama claimed that this new financial reform bill he signed into law the other day would increase transparency. But at least one provision will do just the opposite of what the president claimed.

Also buried in the pages of H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, AKA the “financial reform bill,” and more curiously so, is a provision that gives the government broad powers to compel Wall Street firms to hire more minorities and more women. The legislation creates 20 new offices inside the federal government. And it gives the government powers to terminate contracts if it is discovered that firms are not doing enough to hire more women and minorities.

I’m all for more women and minorities on Wall Street. The “good old boys club,” stuffed-shirt nature of the Street has endured far too long. But I don’t like the government telling you whom you can and can’t hire. It should all be based on merit. And companies should be able to hire whomever they want for whatever reason they want. Furthermore, given that basic economics tells us being racist or sexist in the workplace is not profit-maximizing behavior, the issue would work itself out in the marketplace if the government would just stay out of the way.

... go back to that provision in the healthcare bill that calls for a 1099 to be filed for all transactions above $600. ...originally that if this section of the bill is not repealed, the next logical step would be a VAT. While this is certainly a real possibility, there are some other logical conclusions that can be drawn.

The bulk of the legislation signed into law over the past 25 years (really the bulk of the legislation that’s been created since the country was founded) has added significant real costs to doing business, particularly to small businesses since they don’t have lobbyists in D.C. helping to write the legislation. Likewise, the costs added by requiring companies to file a 1099 for every transaction that exceeds $600 are huge. And you can bet we’ll come across numerous other provisions in the recently signed mammoth bills that will compound those costs.

At some point people will just say, “Screw it. In order to survive, I can’t comply with this B.S. anymore.” There’s no telling when this sentiment will reach “en masse” status, but I can’t see it being too far off given the road we’re currently on. When this point is reached, a huge portion of the economy will move “underground.” Many more transactions will be settled off the grid in the form of cash, for sure, but also precious metals, services, other commodities, and stuff like gasoline, tobacco, and even drugs rather than the more traceable means of checks and credit through banks. The result being that the very legislation intended to keep track of our every move and tax us to the fullest extent possible will effectively destroy the tax base and force the people to report as little as possible for their own survival.

This may sound completely crazy to you. But imagine what would need to happen to force you to quit playing ball with the government – and think to yourself, given recent events, could that actually happen? The answer may surprise you.