Scrap Metal and IRS 1099 Taxes Form

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I have spent the last 7 hours researching this. The Patient Protection and Affordable Care Act of 2009 (click link for full text, in SECTION 9006), one of the reform bills passed as apart of President Obama’s health care reform initiative, made revisions to the Internal Revenue Code of 1986-section 6041 regarding what is known as a 1099. I have summarized my finding below. 

UPDATE: 1099 CLAUSE NOTED BY PRESIDENT OBAMA IN STATE OF THE UNION. CLICK HERE.

What is a 1099?

  • It is only applicable for payments of over $600/year. 
  • It is filled out by the buyer, aka the person who hands over money in exchange for services.
  • 3 Copies are made; One to the buyer. One to the Seller. One to the IRS.
  • Only filed for payments made for services and the like, and is explicitly exempt from buying of merchandise. 
  • Scrap yards, as of present, DO NOT FILE a 1099 for customers who sell them metal scrap, as it is ”merchandise.”



How Does A 1099 Change In 2012?

In 2012, 1099 forms will be issued when paying individuals, but ALSO when paying corporations, FOR ANY PROPERTY! These 1099 forms will be given to you by any business, or in our case a scrap metal yard, if over $600 of money changes is payed to you by them.

Why Am I HAPPY These 1099 will be filed: (read “The glass is half full:”)

One of the reasons I think selling scrap metal is so great, is that there are no sales saxes taken out of the money you receive! There is no social security payed into when you get your money! Metal selling businesses enjoy these perks, and many individuals try to get away with not declaring the money they receive as income!

As a registered llc, I have dealt with 1099s before. But being a registered llc will not stop the scrap yards from giving you a 1099 in 2012. Up until now scrap yards did not have to issue them to the sellers (me and you) because we were selling property/merchandise. Now, most of my income will come from these 1099 jobs, but that doesn’t change how much money in taxes I pay on it!

The introduction of 1099s will simply deter small time scrappers from selling metal, and instead allow bigger, more well established companies, reclaim the business everybody now thinks they are an expert in. (See the Spike TV disaster “Scrappers”)

Why I don’t plan on making any changes in 2012:

I don’t plan on making any changes in 2012, because this law has NOT YET BEEN CLARIFIED BY THE IRS. Basically, as the law stands, the IRS has the power to make any type of exception to the rule.

If the law ends up including “merchandise” (which is currently one of the exceptions to 1099s), if I buy over $600 of toilet paper from Wal*Mart, I would need to send them a 1099 at the end of the year… Why? They already are without a doubt declaring that money, and the IRS will just get stuck with a bunch of extra paper.

So before you go jump off a bridge, just wait until 2012 to see if this actually happens. My opinion is that it will not be a big deal.

… But maybe it will.

Comment!

{ 10 comments… read them below or add one }

jon February 10, 2012 at 6:51 am

ok now i bring scrap in and its never been over 300 bucks a time but i asked for a print out for my year history of what i made and what i brought in so im just wondering since i made 3000 some dollars do i need to claim that on my taxes since i didnt make it all at one time

Reply

ScrapMetalJunkie February 10, 2012 at 3:17 pm

Yes you need to claim any income on your taxes… Although the IRS will not know about the income unless they audit your scrap yard, in which case, they may know if you didn’t claim it.

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Ed January 31, 2013 at 9:21 am

Ok, I am new to this whole scrap metal thing and was completely unprepared for having to pay taxes on my sales. So since I have no receipts, or copys of checks that I have got from the scrap yards. What do I need to do to find out what I made? So that I can report it and/or is it just an honesty thing where I just write down an approx. amount that I made?

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Allie January 30, 2014 at 6:57 pm

Ed, if you call their office, and are polite, they can give you a total for the year that you can put on your schedule C. You can then declare mileage against the money, and only pay taxes on the profit.

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Jack February 5, 2013 at 4:29 am

A few years ago in 2009 I sold an old tractor to a sod farm and they issued me a 1099 misc. Can they do that to me? I thought that the selling of things such as that will not be counted as income. I paid over 4k for it but only get 2.5k back, do they have the right to issued a 1099 to me? That’s like if I went to the local car dealership and purchased a car then issue them a 1099. I don’t think they will like it.

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Renee April 20, 2013 at 8:17 pm

So did this ever happen? Do I have to fill taxes if I make only $1,200/year?

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Corey September 16, 2013 at 1:43 am

What if your scrap does not give a 1099 Form. I have ask them about and they said that was not necessary. I know I make over $600 a year, cuz I keep track. However, now that yard is closed, they went out of business. Any advise, about the 1099, for what I should do a the new scrap yard?

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GB November 25, 2013 at 3:03 am

I was told by my scrapyard that scrapping is recycling witch under the enviromental safe program is helping the earth which is not taxable…. and there is many forms of income that does not have to be reported such as people recieving a few hundred dollars a month from there parents for living…. but who really knows…. and if it was taxable and they audit your scrap yard then it would mean that you would get smart by spreading out your scrap at other scrap yards around your area. I’m not repling on here to start an argument but to simply leave what i know as a comment that took asking a couple questions to a couple different places such as my local scrapyard and calling the state board on taxes. in some situations some people would look at it as a form of extra money which you would claim on taxes but once again recycling to help revive the earth is what you are really doing….

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rd March 12, 2014 at 9:14 am

I have my own small business or llc license that I used to sell metal for scrappers for 20% of their take, to the scrapyards to receive cash upon the sale that day. So does the irs know about the amount of metal sold to the scrapyards by the llc business? And is there a certain % that an llc is supposed to claim as income ? So on and so on ….etc etc.

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