Operation Hidden Treasure is a joint effort between the civil and criminal units of the IRS. Agents are looking at blockchains to root out tax evasion by cryptocurrency users, including the buying and selling of non-fungible tokens (NFTs). With mass adoption resulting in $25 billion in sales of NFTs in 2021, it is not surprising NFTs are drawing the attention of the IRS.
The IRS has only given limited guidance on the taxation of crypto currency and has issued no guidance for NFTs. While the taxation of NFTs might be governed by general tax principles, the IRS could choose to treat them as “collectibles.” If NFTs are deemed collectibles, they will be taxed at higher rates (28%) than other long term capital gains (20%).
How NFTs are classified may have wider ranging implications than the applicable tax rate. For example,the rules governing retirement accounts and pension laws individual retirement accounts also treat collectibles and securities differently.
For these reasons, Seidman Law Group urges you to consult your accountants and other tax advisors for guidance. And no matter what–please remember you are liable for taxes under any circumstances regardless of what the rate might be.
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