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Every time I bring scrap to a yard, they ask for my drivers license. I had assumed that they need that for cases of getting stolen property or something like that. But I am wondering now whether they are supposed to report all transactions to the IRS similar to how an employer would report wages of each employee. Does anyone know if this is what actually happens? I am in MD, in case that makes a difference.
Of course they report it to the IRS.
I don't think they do. When I take in scrap they only ask me for my license when I sell non-ferrous scrap (copper, brass, aluminum, etc). If I am only selling ferrous, then they do not. The bulk of my money comes from ferrous, so they would be losing out of a good chunk of change if they did report it. I think it is just for tracking purposes, in case they get in something that was stolen.Quote:
Originally Posted by ilyaz
Think about it this way: The scrap yards file taxes as a Business using Schedule C. On this is a space to report all income. They pay taxes on this - minus business-related deductions. One of those deductions is the "cost of goods". In case of an audit, the yard will need to "prove" which vendors got what money . The IRS will only allow so much "misc" deductions. The scrap yard may not actually make out 1099s to send each vendor (you are a "vendor"), but in case of an audit, you can bet they have the amount paid to you on file. For instance, in my state they are allowed to pay cash for amounts less than $50 and a couple times I have gotten paid cash. But they will still be able to say they paid me those amounts. Then, the IRS can see if I claimed the same amount as income that yard says they paid me. Now, if the yard says they paid me $50,000 and I say I only got $10,000 from them.... Somebody has a problem.
I guess it goes state by state, according to their laws. Here in Texas we get paid cash for everything, and only have to show a license if we sell non-ferrous scrap.
Below is the Texas Law regarding scrap metal dealers.
Metal Recycling Entities
Anyone operating as a metal recycling entity dealer within the state of Texas is required to register with the Department. For purposes of Chapter 1956, Occupations Code, the regulatory term for "second hand metal dealer" has changed to "metal recycling entity". A metal recycling entity would be a business predominantly engaged in performing the manufacturing process by which scrap, used, or obsolete metal is converted into raw material products consisting of prepared grades and having an existing or potential economic value, by methods including processing, sorting, cutting, classifying, cleaning, baling, wrapping, shredding, shearing, or changing the physical form of that metal. A metal recycling entity also could be a business that manufactures the raw material products from the recycling process into producer or consumer goods. The following exemptions apply:
Exempt:
The purchase of regulated material by a manufacturer whose primary business was the manufacture of iron and steel products made from melting scrap iron and scrap steel.
The purchase of regulated material from a public utility, or a manufacturing, industrial, commercial, retail, or other seller that sells regulated material in the ordinary course of the seller's business.
Registration as a metal recycling entity shall last for 2 years and must be renewed on or before the expiration date if the registrant wishes to carry on as a metal recycling entity. Other Information regarding Metal Recycling Entities
Local Regulatory Authority
Chapter 1956 allows a local government or political subdivision of the state to adopt a rule, charter, or ordinance or issue an order or impose standards that are more stringent than state law but do not conflict with it. Additionally, Chapter 1956 would allow local governments or political subdivisions to issue licenses or permits to a business to allow the business to act as a metal recycling entity in that county or municipality.
Information Provided by Seller
A person attempting to sell regulated metal to a metal recycling entity is required to display personal identification, provide a description and license plate number of the vehicle used to transport the regulated material, and either:
provide evidence in writing that the person was the legal owner or lawfully was entitled to sell the regulated material; or
sign a written statement provided by the entity that the person legally owned or was entitled to sell the material offered for sale.
The recycling entity is required to visually verify and photocopy the seller's identification for record keeping purposes. Additionally, the entity is allowed to take a picture of the seller and the vehicle used to transport the material, a photo of which could be accepted in lieu of the description and license plate number, if the license plate number is clearly identifiable in the photo. The entity would not be required to make a copy of the identification if the seller:
signed a written statement evidencing ownership or authority to sell the material; or
previously had provided this information, and the information has not changed.
A metal recycling entity is required to provide a notice in two inch lettering, warning a person who wishes to sell regulated metal that written proof of ownership is required by state law.
Records Retained
Each metal recycling entity must keep electronic records detailing all scrap metal received at that location and all scrap metal either processed at or dispatched from that location. All purchases of copper, brass, or aluminum material, regardless of weight, must be recorded by the recycling entity.
The details to be kept for scrap metal received are:
The description and weight of the metal;
The date and time of receipt of the metal;
If the metal is received from another person, the name and address of that person;
The price of the metal if it has been ascertained at the time the entry is made in the electronic file;
If no price has been ascertained, the estimated value of the scrap metal;
The registration mark of any mechanically propelled vehicle used to deliver the scrap metal.
The details to be kept for scrap metal processed or dispatched are:
The description and weight of the metal;
The date of processing or dispatch, and in the case of processing, the process applied;
Where scrap metal is dispatched for sale or exchange, the name and address of the person to whom it is sold or with whom it is exchanged and the consideration for which it is sold or exchanged;
Where scrap metal is dispatched or processed other than for sale or exchange, its estimated value before being dispatched or exchanged.
Entries must be made immediately upon receipt, processing or dispatch and electronic records must be kept for two years following the last entry.
Restrictions on sale or processing of regulated materials
A metal recycling entity is restricted from disposing of, processing, selling, or removing from the premises an item of regulated metal unless:
the entity acquired the item more than 72 hours before the disposal, processing, sale, or removal ; or
the entity purchased the item from a manufacturing, industrial, commercial, retail, or other seller that sells regulated material in the ordinary course of its business.
Any peace officer has a right at any reasonable time to inspect registered premises, records kept on the premises and scrap metal kept on the premises. Peace officers may place on hold an item of regulated material in the possession of a recycling entity if the officer has reasonable suspicion to believe that the item was stolen. The hold lasts for 60 days, during which time the entity may not dispose of, process, sell, or remove the item from the purchased material unless the hold is released.
Limited Hours for Purchasing
A metal recycling entity is prevented from purchasing regulated material for more than 15 consecutive hours in one day or later than 9 p.m. Local governments or political subdivisions of the state of Texas are allowed, within these parameters, to establish the hours during which a metal recycling entity can purchase regulated material.
Criminal Offenses and Penalties
It is a criminal violation to knowingly provide false identification or information to an entity or knowingly record information known to be false in the entity's records.
A violation is a class A misdemeanor (up to one year in jail and/or a maximum fine of $4,000) unless the defendant previously has been convicted of failure to comply with identification or recording requirements or buying or selling stolen regulated material, in which case the offense is a state-jail felony (180 days to two years in a state jail and an optional fine of up to $10,000).
The purchase of stolen regulated material is a class A misdemeanor, unless the defendant previously has been convicted of failure to comply with identification or recording requirements or buying or selling stolen regulated material, in which case the offense is a state-jail felony.
The sale of stolen regulated material is a state-jail felony, unless the defendant previously has been convicted of failure to comply with identification or recording requirements or buying or selling stolen regulated material, in which case the offense is a third-degree felony (two to 10 years in prison and an optional fine of up to $10,000).
A court may order an entity to cease doing business as a metal recycling entity for an offense under Chapter 1956. The order of closure would be limited to 30 days for a first offense and 180 days if it has been shown that the entity previously had been convicted under this section.
If conduct that constitutes an offense under this section also constitutes an offense under any other law, a person may be prosecuted under this section or the other law
Where did you find all of that info? I'd like to look up NYs rules
For any State, try doing a Google search using the terms "(your state) statutes" - ie "NY statutes". Then click on "New York Citizen Guide". Then on the Left hand side is a box titled "search NYS government" - type in "junk" and start reading.Quote:
Originally Posted by Scrap man
Here in NJ they just want your name no Id , cash on spot.
Starting in 2012...1099 on every sale!!! one of obamas hidden rules in new taxes
In my state,IL, I'm only asked to show an ID if the total amount of metal I bring in is more than $100. I once asked what this was for and the guy told me it had nothing to do with the IRS, rather the state of IL feels that $100 is the "line in the sand" that a person would feel is worth stealing metal to sell. Plus my driver's license doesn't have my SS#, of course the state could look it up but it would be troublesome. In addition, I'm not given a receipt unless I want one. The yard guy once asked me if I wanted a receipt and I replied that unless I could buy something with the yellow piece of paper(receipt) the same way I buy something with the green piece of paper(money) he can keep it. Since I do this primarily as a "paid hobby", going to the yard once a week and make $30-$60 each time I go, I end up putting a close estimate on my taxes.
I've never been asked to show my ID or even been asked my name. Someone told me that if they started to recognize me as a regular than they would start reporting it to the IRS. I hope this doesn't happen because it might effect my unemployment. Being jobless is the reason I started doing this. Unemployment doesn't pay all the bills.
All scrap yards report to irs even if they pay you cash...they have to pay taxes on it when they sell it...do you think they are gonna pay yours too?...Even with cash payment there is still a receipt so its the same as getting a check!
If they were reporting (currently), to the IRS, don't you think they'd also have your SS# or EIN on file? I've never been asked for that info...
Ultimately the IRS is federal. Any and ALL money earned is considered income and is required by law that it is reported by us on our yearly income tax report. They do not care that we can barely survive on what we make. Most of us consider cash as falling into a gray area...........well, truth is, there are no gray areas. they don't have to ask us anything..........we are expected to play by the rules set, they do have some meager allowances for minimum earnings but after that we have to use expense deductions to prove the costs of earning that cash....and......I just gave myself a headache...........
At the yard I go to, if they give you less than $100 than your paid out of the "petty cash". They don't need a drivers license or anything unless it's over $100. I'm glad the yard is only 3 miles from my house so I tend to take a lot of smaller trips. I weigh out most of what I can before going so that I have an estimate of what I'm getting.
That's what I was wondering as well. I've been self employed for over 20 years and have had employees as well as sub-contractors and a W-4 form is usually used to get this info. Like Re-cycler said most times your taking in cash so it's kind of on the honor system, but if you want to write off truck expenses, supplies, home office or work area etc., you are going to want to show that your bringing in money. Due to higher gas prices they did raise the mileage deduction recently. Your truck in many cases can actually put money in your pocket by driving it provided it doesn't suck up too much gas and have a huge monthly payment for a loan and insurance.Quote:
Originally Posted by Ditchdigger
I had brought scrap to the scrap yard a few times, not for extra money, just to get rid of some junk I had from the house and working on cars. Went down there around 6 or 7 times, don't remember how much cash I got. Do I have to file a 1099 or would it be alright not to, I couldnt imagine all those scrappers putting it on there tax returns. Just saw this post, never thought about it, figured Id ask.
Person or company that paid you would file the 1099 not you...up to you to claim it as income I would recommend it if you get a 1099 but if you don't it's your call. If you get popped by IRS it could be a costly lesson.
I just save my receipts and pay my taxes in April
They won't send me a 1099, I doubt it. The amount is probably somewhere between $500 and 1k, not alot. I had no idea or ever thought to file it on my income. Wish I never saw this post, never would of crossed my mind for something so little. You really think somehow the IRS is going to be able to track down a couple hundred dollars worth of scrap?Quote:
Originally Posted by KZBell
Same her. Every year, I ask my different yards if they will be sending out 1099's or not. This year is still a "no." I continue asking every year, 'cause you just never know when laws may change, even on a state or local level & I haul to 4 different yards in 3 states, so better to play it safe. Besides, one of these years, if they ever have to send them out, it will save me the trouble of adding up the receipts.Quote:
Originally Posted by submarinepainter
If they file a 1099 then in most cases the IRS will catch up with you and want your tax liability for the amount. If no 1099 is filed then the next risk would be if the yard got audited by the IRS at which time all money paid out would be reported and if the yard keeps track of you via drivers license then that could be a bad thing. It's all a roll of the dice and there are certainly bigger fish to fry but sometimes the small ones get caught in the net too.
There was wording in legislation in early 2010 that would require companies to submit 1099 forms to anyone whom they purchase over $600 worth of goods or services from in a given tax year starting in 2012. There have been some revisions to this legislation since, but here is a link to an article about it.
Don't ever assume that your income will not be reported. Government agencies are losing funding sources (ie: Taxes) and are looking for any way to recoup them. Do yourself a favor and get the advice of an accountant and not from a forum. Although the members of this forum are great at sharing advice we are not experts on tax law and you can be getting unreliable information.
Yes they do report it to the IRS. Will you be named specifically? Possibly. If they get audited themselves. Makes sense to report the income, take the deductions and PLAY IT SAFE. Or you could roll the dice and wait to see if it BLOWS UP ON YOU.
Much in the same way you could drive your truck knowing it is low on oil while you have a couple of quarts riding in the bed of the truck. It may make it where ever you are trying to get. For a while anyway. But eventually it will BLOW UP ON YOU. Now that would be VERY COSTLY. Especially when all you had to do was PLAY IT SAFE.
They do report there income and loses to the IRS.But they do not send in each persons name.So i dont think you have anything to worry about.
Nah dont report it the IRS doesnt care about it at all...why would they..sell away!!!!
I pay taxes on services that my business provides. Most of my customers paid taxes on the material when purchased. The initial seller is solely responsible for taxes, that's my interpretation of fed law, but I leave it in the hands of my bookkeeper. Some may go as far to get a resale license? I do know gov. is looking to better regulate this industry.
I asked my scrapyard if they 1099 me after my first big job. They laughed and said, "you're probably the only guy that knows what a 1099 is around here." This is NY though, and a pretty big metal recycling company...Alot people ride some pretty high horses around here I've noticed...take everything you read with a grain of salt, it is the internet, ask some of the other scrappers at the yard, they'll probably laugh to. If you own a registered business, that's a different story, but the average "street-level" scrapper I dont think needs to worry.
I worked as an accounting assistant for over 10 years, and you should pay taxes on all income received, and keep records of all expenses, for your own benefit.
I have read on the this forum that some scrap metal yards issue 1099 forms. Do you need a license to sell over 10 cars to a scrap metal yard in Maryland?
Thanks
While I agree and report all income, if only to stay out of trouble, your yard has to have your SS number to issue a 1099. No SS number, no 1099.
I think they ask I'd based on their cities requirements. I go to two yards in two different towns. Yard A requires id each time . The first time I went their they said the city had just started making them do that. I'm assuming for theft tracking purposes. Yard B does not require id, unless, you sell more than 100$ worth. I will file my reportable as "hobby income" I've studied the write offs associated and found the write offs may be mire beneficial than not filing at all.
Talk to your yard basically up to them on the 1099 issue and in kansas its not income, just selling something. Talked to the lady at the kansas unemployment office, when was on it couple years back, and she said it was not considered income by the state of kansas. Again varies by state, as per the federal obama tax deal, talked to my tax guy and he informed me it was a urban legend. Don't see why they would need any more taxes, pay tax on all my supplies and fuel, not to mention, they taxed most of what I torch for at least 20 years before it was considered "junk"
Thanks, Tater!
I would hate to see what would happen to the prices if the yards had to start reporting every transaction the IRS and sending out 1099's to every scraper that came into the yard. The prices would be cut in half just to pay the extra overhead it would take to do this.
Four more years and it's anyone's guess as to what could happen.
I read somewhere that 1099 plan on income over 600 got shot down.
If I scrap something that I have purchased then I don't see how they could tax you for it again because I have already paid taxes on it once. If you are scrapping as a business then I could see them wanting their tax money.
I have been deleting posts suggesting that you report income as "recovered loss". Recovered loss refers to insurance claims. As such, this advice is considered "advocating illegal or unethical activity" and is deleted. Please do not post it again until you PM a moderator or admin showing how this conforms to IRS rules/laws.
if you make a capital gain on a purchase, you have to report that gain. technically you should have paid sales tax on the item, yes.. but say you bought it for $10 (including sales tax) and sold it for $100... you now have $90 of taxable income to declare. thats why you need to log your expenses as deductions from income as well. gas/truck repairs/ purchase cost, etc.Quote:
Originally Posted by toula
OP:
i asked my yard about 1099's when they switched their payout system, because they asked me for ID again, even though they knew exactly who i was. They laughed at me and told me they were not doing it. i suppose the potential is there in the event of an audit, but i do believe they have enough working knowledge to protect themselves as well as any significant vendors who provide them with enough scrap.