Is the IRS cracking down on NFTs?

By November 23, 2021NFT
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A provision in the infrastructure law deals with reporting digital asset earnings. Our expert say this applies to NFTs, too.

WASHINGTON — Is the IRS cracking down on digital assets like crypto currency and NFTs? That’s a claim circulating online.

According to the posts, inside the bipartisan Infrastructure plan is a law that forces digital earnings to be reported to the IRS.

There is a tweet gaining steam online. In the thread, it claims the bipartisan infrastructure law has a provision that forces you could be charged with a felony if you don’t report NFTs that you bought or sold.

To clarify: NFTs aren't illegal, but any NFT sold for over $10k has to be reported to the IRS within 15 days. Meaning either NFTs are sold for less than $10k or you lose anonymity of your crypto wallet.

Either way, a huge W https://t.co/dzFKAp9hqZ

— LakeFoundTheirExit (@LakeFoundExit) November 7, 2021

Did the infrastructure law make it a felony if you sell or buy an NFT for more than $10,000 and not report it to the IRS?

Yes, technically the new provision would make it a felony to no report large digital asset transactions.

Before we go any further, let’s start with the basics.

What is an NFT? It stands for Non-Fungible Token.

So, what does that mean? Teana Baker-Taylor explained it basically means a unique internet asset.

It’s an item that has no equivalent item or value.

“Those could be cases of wine, they could be digital artwork, they could be royalties, within a television series, “ Baker-Taylor said.

The internet keeps track of these items on its digital ledger: The Blockchain. In the last year-these formerly unknown items- have exploded online.

People have paid millions of dollars for things like the Twitter founders’ first tweet. NFTs, along with crypto currency, have come to the forefront of digital commerce.

Let’s get back to the Twitter thread. Did the infrastructure bill make it a felony to sell an NFT for more than 10 thousand dollars, and not report it to the IRS?

Our experts say: Yes.

Since the 1980’s, any cash purchases made for more than $10,000 need to be reported to the IRS. Kirk Phillips said this usually applies to large face-to-face transactions.

“I'm thinking like, you know, a car dealer, or a jeweler,” he said. “Where there's cash there, and somebody would go buy, you know, a diamond, or maybe buy a car that's greater than $10,000.”

The infrastructure bill added digital assets to that reporting requirement transactions with things like cryptocurrency and NFTs.

“If you look at the description of how they are classifying or qualifying what is a digital asset, NFTs would fall into that bucket of information,” Bakery-Taylor said.

While not reporting digital asset earnings could get you a felony charge, no one really knows yet how hard the treasury plans to crack down on NFTs.

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