Tag Archives: barter

Recent Legislation Allows Congress to Track You

The new paradigm in Congress: Pass legislation first, then figure out what’s in it.  We have certainly learned much about the worthless health care reform bill and now a real head scratcher.  Section 9006 of Obamacare amends section 6041 of the IRS code so that when you buy or sell more than $600 of anything, within a fiscal year, you have an obligation under the new law to issue 1099s.

The purpose of the 1099 form has traditionally been to report income for contract labor.  In fact, contract work is often referred to as working under a 1099.  Now, the government may have chosen to use it to track something else: precious metals, barter and any other activities the government wants to track.

Combining section 6041 of the IRS code with the amednment (section 9006 of Obamacare) yields the following according to  FreeRepublic.com post

All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, amounts in consideration for property, premiums, annuities, compensations, remunerations, emoluments, or other gross proceeds, fixed or determinable gains, profits, and income (other than payments to which section 6042(a)(1),6044(a)(1), 6047(e), 6049(a), or 6050N(a) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), or 6045), or $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for,shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gross proceeds, gains, profits, and income, and the name and address of the recipient of such payment.

Why would the government need to do this?  Gold isn’t used in any significant quantities for the performance of business transactions.  Do the Bourgeoiscrats in Washington worry that the dollar will decline to a point that more Americans will start using alternative methods of commerce like a barter system or gold?  Or is there some other reason for tracking precious metals – specifically gold.

In the South during the civil war and reconstruction, currency became worthless.  Southerners didn’t turn to gold as form of currency, they reverted to the barter system.  The new law says that a 1099 should be created if it transaction exceed $600.00 in a single year.  So although some feel that this is an attempt of the government to track commercial transactions paid by other means than dollars – that, at first, seems unlikely.  An article at Rofasix’s blog explains the case that the government is planning to track barter-based transactions

The government wants to make it illegal to have a transaction such as a barter or trade that goes unreported to the state. So now, whatever the exchange, if you don’t file a Form 1099 you just broke the law. The reason for the need the thousands of new IRS agents as well as the massive 12-gauge pump shotgun buy for the IRS starts to become clearer now, doesn’t it?

While a nefarious purpose seemed plausible, preventing untaxed barter commerce did not seem to me to be the target.  The amended law clearly defines that the transactions must result in $600.00 of payment for services or goods within a fiscal year, right?  The law seems to quantify itself using U.S. dollars and would therefor not apply to in-kind trade.  But as a  David Ganz  post at Numismaster.com pointed out:

It doesn’t matter in what form payment is made, whether cash, check, credit card, or Yap stone money, the $600 threshold applies.

That’s disconcerting at a minimum and Orwellian at it’s worst.  David Ganz makes the case that it is the worth of the goods, regardless of form of payment.  The law is not clear here, so David may have something.  This would force Americans to report all forms of trade and if it were a barter trade, wouldn’t both sides have to report it?

Another possibility is that the $600.00 amount could be used to track the purchase, sale and trade of gold.  This has been speculated to be the original intent of the law.  For what purpose?  In, “Inflation and How it May Affect You”, I used the government’s own historical actions to explain the issue with gold:

While gold is a hard asset, I have one basic concern with owning gold as a hedge to inflation. If gold becomes a better currency than paper money, the government could do what it has done in the past – take it from you. In 1933 President Roosevelt forced citizens to sell all of their gold at a price that had not adjusted for inflation (roughly $21.00/ounce), once the government had all of the gold, they re-adjusted it for inflation and deemed it worth $35.00/ounce. Gold did not function well as a hedge in that case, and I believe a liberal government would do the same thing again to increase the money supply if all else had failed (which it would have if we were relying on gold as currency).

It becomes obvious why the government may want to know who has gold so that they can make sure they get it all at the pre-inflation price and can resell it after re-adjusting it’s value.

This could also be a way that liberals are seeking to control activities that they cannot constitutionally control.  How about closing the “gun show loophole” without specifically writing a law?  That hunting rifle someone buys at a gun show.. previously, no federal forms were required, but now – if it’s worth $600.00, I have to tell the government that I bought a gun and who I bought it from.  If I trade one gun for the other, we both have to tell the feds about it or we are guilty of tax evasion.  Imagine all the other freedoms the government could impinge upon using this section of the health care law.

Speaker Pelosi told us we wouldn’t know what was in the health care reform law until it was passed.  The hits just keep on coming.