Put yourself in storage auctioneer John Cardoza’s shoes. A storage auction regular approaches and asks to speak with you in private. “I found $500,000 in that unit you sold me in San Jose,” the fellow whispers. “What should I do?”
Cardoza, the owner of Storage Auction Experts in CA, didn’t have to think twice. He knew that, given the side of the tracks on which that particular unit was located, the Internal Revenue Service was the least of this lucky buyer’s concerns.
“I said, ‘First of all, tell absolutely nobody else. Then hope the guy who put that money there is no longer with us, because if it’s that much money, more than likely it’d drug money and they’re going to be back – if they can,'” Cardoza recalled. “You want to keep a low profile on something like that.”
While the big score – the hamper full of Krugerrands or a long-lost Monet – is largely a trope of storage-themed reality TV, it does occasionally happen. That, in turn, begs the question: What’s the best way to proceed should you luck into sudden wealth?
Auctioneer Rich Schur, the owner of Schur Success Auctions & Appraisal in Colorado Springs, CO, said buyers who hit the jackpot are typically cautious about broadcasting it.
“My auctioneer’s perspective is, tell the world! Get on Facebook; make a big deal about it! Let the world know how exciting it is!” Schur chuckled. “But that’s going to bring more bidders and more competition, and that’s the last thing a professional buyer wants. It’s usually the new buyers who make the mistake of bragging to the world.”
What if your big find isn’t so easily valued? What if you don’t even know what it is? “The times you do want to make it public are when you need help from other people to identify or liquidate it,” Schur said.
To Declare, or Not to Declare
Tim Schaffner, director of tax services for the Solomon Group in Austin, TX, says the U.S. tax code requires you to report your worldwide income, regardless of the source. The IRS will then tax your treasure at anywhere from 15 to 36 percent, depending on your income tax bracket. If you don’t report your treasure and sign your tax return anyway, you could be prosecuted, fined and even jailed for perjury if the IRS cares to pursue it.
But that’s a big if these days. Schaffner says today’s shrinking IRS makes detection the exception rather than the rule. In fact, it’s estimated that the “tax gap” between what is technically owed and what the IRS collects ranges anywhere from $438 to $600 billion per year.
“The IRS is down 22 percent on personnel and they audit less than 1 percent of returns, so the odds of being audited are kind of slim,” he said. “But if you find yourself featured on ‘Storage Wars’ to where there is documentary evidence that they can discover, or you make enough noise about it on social media, the IRS will put somebody on it who knows what they’re doing.”
Who should the lucky Chucky turn to for a guiding hand?
“Don’t tell me!” Schaffner quipped. “But for good reason: there is no privileged communication between a client and their accountant. For that, you need a lawyer.”
And if you’re a storage auction regular and need some extra space to store your finds, SpareFoot can help you compare by amenity, location, price, and more.