US IRS Issues New Reporting Instructions for Digital Assets
The Internal Revenue Service (IRS) of the United States has amended its reporting requirements for digital assets and clarified the taxation of non-fungible tokens (NFTs) and stablecoins.
The IRS’ draught guidance for the 2022 tax year classifies cryptocurrencies, stablecoins, and NFTs as ‘digital assets’ for tax reasons.
The last clause appears to leave up the possibility that any future breakthroughs in the crypto area might be included in this category.
In contrast, the 2021 guidance used simply the phrase “virtual money” and lacked specific instructions for stablecoins and NFTs.
However, under this proposal, NFTs will not be taxed the same as art since they are not classified as such. Rather, it is considered an asset, not a collectable. For instance, when an artwork is sold, a 28% capital gains tax is normally due in the United States. This fluctuates from 0% to 45% for crypto, depending on a number of circumstances.
All taxpayers must respond to the question on digital assets, according to the policy paper, which instructed individuals not to leave this area blank.
In September, a US district court authorized the IRS to pursue people who seek to avoid paying taxes on their cryptocurrency transactions. The directive was issued at a time when digital asset use was on the rise, and as a result, the number of crypto tax evaders was expanding.