Print

Please login or register.
1 Hour 1 Day 1 Week 1 Month Forever
Login with username, password and session length

[Silver]

nevermind

[Docliberty]

Hi Silver.

I'm not a lawyer nor do I play one on T.V., so what I have to say is just my humble opinion.  Your idea sounds interesting and has some very interesting possibilities.  As to the legality of the scheme (or more importantly, what the IRS would do about it), I don't know.  I wouldn't necessarily want to be the first to try this.

 

[Rob Lister]

Just on the first glance and consideration of it, and without verifying some of assertions concerning the sales and redemptions tax, it seems at best you have at best shifted the tax burden from the employee to yourself.

If you pay your employee three fifty-dollar eagles then he has a tax burden of 150 dollars -- true.

But your cost is not 150 dollars.  It's more like 1500 dollars.  1350 of which you cannot write off as overhead.  So you end up paying the taxes he does not pay, and you probably end up paying even more than he would, given your bracket.

[kbarrett]

I am not a lawyer or an accountant or a tax attorney. I don't see anyone here who claims to be a lawyer, and I am not asking for legal advice.  I am certainly not suggesting that anyone try this scheme.  Do not try this at home.

Who can see the flaw in this strategy?

Expecting the IRS to follow it's own rules. If you want to pay your employees under the table in gold, then more power to you ..... I'd line up for that in a heartbeat. But expect the IRS to try to find some way to screw you.

Marc Harris tried to go the boyscout route, and set up perfectly lawful overseas trusts for upper middle-class US clients .... he was very careful to follow the regs to the letter. The IRS kept changing the rules until they had enough of an excuse to indict him .... and then applied pressure to the Panamanians until he was forced out, and delivered to the US by the Nicaraguans after trying to skip out.

Now they've got him in a federal cell, and are squeezing him for info about his clients.

I encourage you to go ahead if you feel strongly about it .... but go in with your eyes open. The IRS will keep after you until they can make an example of you ... tax protestors, and anyone else who questions their legitimacy will always get special attention from them.

[Silver]

nevermind

[Rob Lister]

As for Rob Lister's comment

But your cost is not 150 dollars. It's more like 1500 dollars. 1350 of which you cannot write off as overhead.

First, why can't I write that off as overhead?  The lawyers will have a field day fighting over the
implications of making the gold and silver coins legal tender, but one could argue that I am
only taking actions to reduce my tax burden, which has been recognized by the courts as
being perfectly legal and proper to do.

 

I don't think you can do that.  In fact, I'm almost 100% certain you cannot do that.  While the sale/redemption of the coins may not be reportable, the income you use to purchase the coins most certainly IS reportable.  You cannot defer your taxable income in that manner.  If you could, then the standard IRA deferment limits would mean nothing.

[Rob Lister]

So Sorry, I forgot the second point.  You wrote: Second, what if I set myself up as a coin dealer, pay myself in legal tender coins?

Because in order to do that, you, or somebody, has to first purchace the coins with which you are paid.

Let's bring it down a notch.  Consider why it is that AGEagles are not reportable.  They are not reportable because they are nothing more than an exchange of one currency for another.  Much like trading in two tens for a twenty.

Sure, this gold-guilded twenty may someday be worth more than would the two tens, but on average, they will be worth exactly two tens, or perhaps only slightly more.  You may get lucky and end up holding a couple of million worth of gold when a run on the market happens.  Then again you may get unlucky and end up holding a couple of million worth of gold when a dump comes.  In the end it evens out so gracefully that the U.S. Gov, IRS et al, does not bother to make any real special rules concerning its trade.  

Note that for other gold currency, they do make special rules.  Usually when the currency in question is not tied dollar-for-dollar to the Fed Note.
 

[Rob Lister]

I'm not a tax lawyer so, who knows, maybe I am full of it.   Let's go through it again and look at it logically.  I'm going to turn off the quote thing because I don't really know how to use it yet.


ROB LISTER: While the sale/redemption of the coins may not be reportable, the income you use to purchase the coins most certainly IS reportable.

SILVER: Nope.  I run a small business with cash basis accounting, like most small businesses.
Cash basis means, in its simplest terms, that I pay tax on the change in my bank account balance

Are you an S-corp?  Not that it matters really except, if you are then the argument changes.  If you are not then you have to report your gross receipts pretty much verbatim and work back from that point to your deductions (same for an S-corp but the convulutions getting there are more grand).  If your gold coins are to be deducted as overhead, then I can see no manner by which you would/could (more to 'could' than 'would') document it?  And even if you could, they would become a company asset.  Oops!  You traded that asset for labor.  You're right back where you started.

 

[Ted Nielsen]

It looks like you could buy the coins as bullion and use them as currency. I'd love to be sitting next to you when you run this by a laywer or an accountant.

http://www4.law.cornell.edu/uscode/31/5103.html

http://www4.law.cornell.edu/uscode/31/stIV.html

[Junker]

IMO:

(for here 1ozt gold = $400)

Your company decides to pay its employees 'dollars' in the form of ~$50 gold eagles rather than $50 paper bills. That seems like the company's legal choice. The company has increased expense because of that--procuring $50 gold coins is more expensive than procuring $50 paper bills. It would seem that that is a valid expense for the company. I don't think it is illegal to choose a more expensive procedure. So, it should all be legally deductible as an expense, leading to a reduced taxable profit.

The employee receives $150 from 3 $50 gold coins. Then the employee and the company both must report the $150, the legal tender value, as the Eagles *are* issued as tokens of legal tender. That either one pays taxes in bills seems to be just as much another valid choice.

Consider owing $400 in tax: If you send one $50 gold coin, the IRS would credit your account with $50, not $400. But, as we know, in trying to screw you, the IRS will try to maintain it as $400 income whenever it wants to.

When the employee sells a $50 gold coin for $400, he generates an additional $350 taxable income and that is reportable by him even if not reportable by the coin dealer.

So is my opinion, being neither lawyer nor accountant.

- - -

As well, it seems, the IRS will try to kill it by bankrupting the company through litigation expenses or jail the owner by using less than unbiased court personnel. 'Legal' or 'accounting' opinion will not count for much then.

Have you followed the Texas business man who 'legally' stopped paying withholding tax on his employees? He's in jail.


 

[Junker]

Also:

I'm in Germany now and not as familiar with small business in the U.S. as you all. Here there are sometimes certain advantages to using freelance contractors rather than employees. How would that work in the U.S.?

It seems to me that the burden of SSA matching funds, withholding, etc. would automatically drop out.

[H.M. WoggleBug, T.E.]

As for using contractors, that's been tried. Small firms that use contractors are a red flag to IRS. People who have done so have been persecuted, fined, jailed. The only quasi-safe way for a small firm to do so these days is through "body shops" that have acquired the resources and expertise to jump through the various, ever-changing IRS hoops

I can verify this in my own field of High Tech. As I stated above, independent contractors are virtually extinct. You simply have to go through an agency. Most agencies switch their contractors around so that you don't get too many jobs with them in case "too much" of your income comes from a single agency. Long term contracts are still availble, but they don't give those to non-employees. Since I live 400 miles from the work, that means I don't get per diem, mileage, etc.

The result is 25-33% of the money goes to the agency. That's the overhead you pay.

Thanks IRS!

'Bug