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Tax on NFT investors to the tune of billions of dollars.

Tax on NFT. Taxes will be levied for NFT investors to the tune of billions of dollars. Data from Chainalysis suggests that the NFT market has grown to $44 billion, but the laws governing taxation of the tokens are hazy. As one of crypto‘s trendiest segments, the uncle Sam wants a piece of the action.

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Chainalysis data show that the nonfungible token market has grown to $44 billion, attracting investors like Justin Bieber and Melania Trump. Tax experts estimate that investors and developers of nonfungible tokens face billions of dollars in taxes and rates of up to 37%. According to Internal Revenue Service officials, they are preparing for a major crackdown.

As result of the ambiguity surrounding taxation on tokens, NFT collectors are unable to accurately determine how much money they owe. 
Investors are more likely to be penalized in the future if they don’t understand they owe taxes or that they need to file more than once year.

“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.”

Chart showing exploding value of NFTs last year


With so much at stake, the IRS will be obliged to clarify the regulations, but Michael Desmond, the former IRS general counsel and now partner at Gibson, Dunn Crutcher, said it may begin auditing people first.

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Investigators at the IRS are gearing up for an influx of cases that might happen as early as this year.

“We subsequently will probably see an influx of potential NFT type tax evasion, or other crypto-asset tax evasion cases coming through” said Jarod Koopman, acting executive director of cyber and forensic services at the IRS’s criminal investigation division.

Source: Bloomberg, Aljazeera

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