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BFI Perspectives 

  • Scott Schamber

As an IRS Audit Offensive Gears Up, it’s “Better Late Than Never” for Physical Metals

With the Biden administration claiming a more aggressive IRS could raise roughly $700 billion for the US government over the next 10 years, and reports they will add some 1300 auditors in the near future, we’ve got good reason to believe an “audit offensive” is on the horizon for US taxpayers. Holding precious metals at home (or abroad) now or in the future can offer a sigh of relief.

It’s been easy to find reports this spring of how the Biden administration and congressional Dems are ready to raise taxes on companies and top-earners in the US – who wouldn’t, considering the debt that continues to accumulate. Their hope is to also collect billions of dollars by beefing up audits. However, to do so, Biden will have to rely on the down-but-not-out money-collecting arm of the government, the Internal Revenue Service (IRS).


Mentioning or receiving a letter from the “I.R.S.” tends to instill fear and trigger cold sweats for most Americans – it still does for me, even though I haven’t lived in the US in over 20 years. But from 2010 to 2020, the IRS lost a net 15% of its employees. In 2019, it was reported that the IRS had its lowest number of audited individuals in nearly 40 years.

Few IRS Audits of Taxpayers Reporting > $1M in Income, TRAC Reports, Inc., March 18, 2021


Biden called for more enforcement during his campaign, but he has yet to detail the full plan for the IRS. Of course, even if estimates that the IRS could raise that $700 billion are true, it’s still a drop in the bucket compared to a budget deficit of over $3 trillion…and set to grow more. Nonetheless, the writing is on the wall.


And, if you think this is a U.S-only problem, think again. As we’ve experienced in the past, there’s a clear “monkey see, monkey do” pattern when it comes to compliance and reporting initiatives out of the US. Which government isn’t in the same boat, facing high debt and the potential of exorbitant inflation, and needing cash?


This “audit offensive” had us wondering what, if any, risks could be posed to precious metals investors in general, and how the precious metals investor with some metals being stored outside of the US (or their home country in general) could afford extra protection in this regard. If you really think about it, owning physical precious metals right now can carry a number of advantages beyond the usual crisis/inflation/fiat currency hedge that has us investing in them already.


As an American myself, I understand that I still need to report my realized taxable gains (or losses) on the sale of my gold or silver bullion on a tax return. I want to make clear that I’m not suggesting you sidestep that obligation. But herewith lies one advantage of physical metals: physical metals are a great buy-and-hold option that do not have to be regularly reported for their gains each year on your 1040 form.


Practically speaking, as an investment, physical gold and silver bullion will never lose value, nor will they be locked in and only tradable at certain points in time. You can sell your physical metals whenever you want, in whatever sizes you want. And, they can be passed along to your family quite easily, literally hand-to-hand. Storing metals outside of the banking system is also a great way to hedge against sudden bank holidays or restrictions of access to your bank accounts and safe-deposit boxes.


If you consider the endless gold-vs-crypto discussions we’ve heard and read about, another advantage is that physical precious metals continue to fly under the radar. All investors have taken notice of opportunities in crypto assets…but so has the IRS! And with the major gains many investors have been bragging about over the past years, why wouldn’t the IRS (and tax authorities all over the world, for that matter) take notice? The IRS has continued reaching their hands into the cryptocurrency cookie jar with continued pressure on enforcing the reporting of trades, and that will only continue.

When you take physical metals ownership a step further to include holding some outside of your home country, you have the added benefit of having physical distance between you and your metals, especially for those worried about confiscation. Metals dealers like Global Gold are not obligated to report purchases to anyone other than our clients. Physical metals also cannot be “hacked” or seized electronically. And, despite the physical distance, we can arrange the delivery of your metals back to you, or the sale of those metals, at any time.


So, with the IRS audits likely to increase, as with the inevitable tax grab, it’s better late than never in terms of investing at least some of your overall assets into physical precious metals. Perhaps the good news is that it takes specialized and well-trained personnel to audit a business, a high-net worth investor, or to investigate a tax scheme, so changes can’t happen overnight. But choosing the right investments can certainly help.


Finally, it is also worth highlighting that no matter which direction you go with your precious metal’s purchases, it’s always a good idea to keep records of your purchases and sales. With the “IRA Audit Offensive” gearing up, you know as well as I do that you need to continue to dot your i’s and cross your t’s.


>> Read more here.

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