Keeping Track of Your Coins Can Be Taxing
COINage Magazine|April-May 2020
NUMISMATIC CERTAINTIES ARE TAXES AND TAXES
Joshua McMorrow-Hernandez

Surely you keep your coins safe in an album, folder, or display case. Perhaps your numismatic books are organized neatly on a shelf in your study. And you might even dedicate a special spot for storing your numismatic supplies and accessories. But how well do you keep records of the valuables you have in your collection?

Is managing your numismatic collection on paper, a computer program, smartphone app something you do at all? Do you have a thorough list of your numismatic assets in case a natural disaster or other emergency strikes? Know what to show Uncle Sam in case he (or his well-dressed associates) come knocking on your door for answers about the bullion coins you claim for tax deferment in your Individual Retirement Account? Are you aware of the stipulations – and loopholes – concerning collectibles and retirement accounts? And, as much as you may not want to think about this, do you have all your affairs sorted, so your heirs know what to do with your collection – or even where to find it?

Yes, these questions may be heavy and many, but they’re designed to get you thinking about keeping your numismatic house organized on paper. And these probably aren’t the questions you signed up to answer when you began collecting coins – or selling coins if you’re a part-time coin dealer or numismatist who has liquidated coins for personal reasons. Yet for better or perhaps worse, we’re no longer in an era when a simple handshake is good enough to seal a numismatic deal, or in a time when financial matters can be sorted merely in one’s mind, or when taxing authorities turn a blind eye to profits made on a coin sold for the purpose of upgrading a collection – or for simply paying the rent.

The truly vast and diverse topic of numismatic-related documentation is worthy of many books individually dedicated to various facets of this ever-evolving topic. But it’s introduced here to familiarize you with the subject and to hopefully prompt an evaluation of what you can do to get – or keep – your numismatic financial house in order.

RECORDS ARE YOUR FRIEND

Robert Fligel knows finance, and he loves numismatics. He began collecting coins when he was a kid, organizing his finds in blue Whitman folders. His love for money evolved from collecting it in the form of coinage. Graduating from the University of North Carolina in 1972 with a bachelor’s degree in accounting, he practiced as a Certified Public Accountant for many years before parlaying his love for money into recruiting and staffing efforts for CPA firms. He later founded RF Precious Metals, LLC to assist collectors and investors with asset protection and to help facilitate the purchase or sale of rare coins and bullion portfolios.

He tells collectors and investors that the best way to protect themselves – and their assets – is to keep a clear record of them. “I believe folks should be very upfront with insurance companies, taxing agents, and others about their collections,” he says.

Fligel says IRS audits these days are often less dramatic than what some people may recall from an earlier era or may have seen on a television show or in a movie. “If you ever get audited, and the percentage of those who do is very low these days, more often than not, it’s a correspondence audit,” he explains. “Most times these days, they request clarification on certain documentation, and if you can’t furnish a receipt, they’ll send you a bill for that tax amount.”

But that doesn’t mean you can’t get in hot water – very quickly – if you don’t have records and receipts to back up your financial dealings.

“There’s something called the Taxpayer Compliance Measurement Program [TCMP], in which taxpayers are randomly selected to help the IRS gather statistics.” And these audits are thorough. “If you’re selected for one of these audits, you have to document everything on your tax return. Every income. Every expense. Every cent,” he notes. “Even people who keep good records don’t keep everything,” he adds. “It’s probably a little easier these days as banks keep track of everything, but gathering all of these documents can be difficult.”

Keeping invoices, receipts, disbursements, and a chronological record of all transactions is the way to go. Thankfully, there is a plethora of computer programs and smartphone apps that help make swift work of keeping these records organized and readily accessible. “Whether you’re aggressive or unaggressive about keeping records, it’s important. Whether you have a paper ledger, an online program, an Excel spreadsheet, or an accountant do it for you, just keep a good record.”

“WHO GETS DADDY’S COINS?”

Sadly, that’s a question that is asked every day and often without a definitive answer.

“I think there’s a huge percentage of people who do not have wills for a variety of reasons,” Fligel says. “Maybe these folks don’t want to face their mortality or take the time to set up a will. But, regarding coins, it’s even more important to face this serious human-nature issue.”

Fligel relates a story he once read about one particularly eccentric coin collector who had valuable coins hidden in his house in different places, and his heirs weren’t even aware of them. “The next thing you know, things get thrown away, the coins end up at the flea market or in the dump, and nobody knew about them except the collector.”

He goes on to say, “In similar scenarios, the collector passes away, and the collectibles are hidden somewhere until the new homeowners get a nice surprise while cleaning the house or remodeling it,” he says. “And hopefully, they went to a reputable coin dealer.”

The bottom line here? If you don’t want your collectibles to end up in the garbage, sold for pennies on the dollar at a flea market, or plopped in the hands of a total stranger, plan ahead and make sure your valuables are accounted for in a legal will. “You can’t make anybody do anything, and I’m the exact opposite – I’m an over-planner – but if you’re doing something that’s worthwhile such as collecting coins and there’s value to it, and you want your heirs to get your items, whether they’re coins, paintings, silverware, or other heirlooms, you have to document it.”

Documenting all of your valuables doesn’t have to be as daunting as it may sound. “Whether you do it through technology or in a notebook with a pen and paper, there are many avenues for keeping track of what you own and where it’s stored so that your heirs will have knowledge of the assets you own and wish to share,” Fligel says.

The goal of creating such directives is preventing the loss of your assets to a government agency, having them end up in the wrong hands, or touching off a family feud. “Your loved ones need to know who is going to get your stuff. Otherwise, it will be a free-for-all with fights over who gets Daddy’s coins.”

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