Those wishing to offer feedback to the IRS on having NFTs treated as collectibles, such as coins or works of art, have until June 19 to submit comments.
The United States Internal Revenue Service said it plans to release guidance on having nonfungible tokens, or NFTs, treated as collectibles under the U.S. tax code.
In a March 21 notice, the IRS called for feedback from the U.S. public on how NFTs could be taxed as collectibles. According to the government body, collectibles under U.S. tax law “do not have as advantageous capital-gains tax treatment as other capital assets,” seemingly referring to how crypto assets are currently taxed in the country.
“Until additional guidance is issued, the IRS intends to determine when an NFT is treated as a collectible by using a ‘look-through analysis,’” said the notice. “Under the look-through analysis, an NFT is treated as a collectible if the NFT’s associated right or asset falls under the definition of collectible in the tax code.”
Under the U.S. tax code, selling collectibles such as coins or artwork is subject to a maximum capital gains tax rate of 28%. The proposed IRS guidance could apply the same standard to an NFT certifying ownership of a coin, piece of art or similar collectible.
The IRS called for comments to be submitted by June 19, so U.S. taxpayers needing to file their 2022 returns before the April 18 deadline likely won’t be affected. Forms require anyone receiving, earning, transferring or selling crypto to check a box in the affirmative to correctly report their taxes and, depending on the filer’s status, report transactions as capital gains or income.
If you owe taxes, it’s important to file your #IRS tax return by the due date and pay as much as you can. Late-filing penalties are calculated based on the amount owed for each month a tax return is late. See https://t.co/tZ7Ni3lhn3 pic.twitter.com/FEnYtsBDiT
— IRSnews (@IRSnews) March 21, 2023
In October, the IRS introduced a draft bill proposing NFTs and cryptocurrencies be reported in a broad “Digital Assets” section for tax purposes. Generally, if a U.S. taxpayer hodls all digital assets for an entire year or transfers them between wallets they control, those holdings do not need to be reported.