It’s one of the hottest corners of crypto – and now the U.S. government wants its share of the profits.
Investors and creators of nonfungible tokens – a market that has ballooned to $44 billion, Chainalysis data show, and attracted fans from Justin Bieber to Melania Trump – face billions of dollars in taxes and rates as high as 37%, according to tax experts. Internal Revenue Service officials who deal with tax evaders say they are gearing up for a crackdown.
The surprises looming for NFT enthusiasts when tax filing season begins this month are crypto’s latest wake-up call from Washington as officials across the U.S. government set their sights on the burgeoning industry. The rules about taxing tokens aren’t clear, leaving NFT collectors scrambling to calculate how much they owe. Investors may not realize they need to pay any taxes at all or that they should file more than once a year, increasing the odds they’ll face future penalties.
“You don’t get to not report gains or losses because the IRS has failed to provide guidance that meets your expectations,” said San Francisco-based tax attorney James Creech. “The harder it is for people to get to a reasonable — or ideally, a right — conclusion, the easier it is to ignore it.”
The NFT market has ballooned to $44bn, Chainalysis data shows, and rules about taxing the tokens are not clear.