Financial planner urges NFT enthusiasts to carefully weigh tax ramifications
ATLANTE, April 27, 2022 /PRNewswire/ — Artists and Investors Should Know NFTs Can Complicate Their Taxes, Says Certified Financial Planner™ Thomas Walch.
Walsh, senior customer service manager for Palisades Hudson Financial Group LLC, wants to make sure people dealing with non-fungible tokens understand that the Internal Revenue Service is interested in this relatively new phenomenon. This interest could open NFT enthusiasts to scrutiny from tax authorities. In an article for the firm’s newsletter (available online at https://www.palisadeshudson.com/2021/11/the-tax-consequences-of-nfts/), Walsh suggests that – from a tax standpoint – NFTs have a lot in common with cryptocurrencies and traditional collectibles.
“NFTs are new enough that tax authorities have released little guidance,” Walsh says. “Taxpayers buying or selling NFTs should take care to carefully handle related tax issues.”
The tax treatment of NFTs can become even more complex for those hoping to derive income from an individual token, not just by selling it for profit, but potentially by “splitting” it. Artists may also face complex tax issues depending on the structure of a particular NFT they have created.
Walsh cautions, “Tax considerations for a business venture involving NFTs can become very complex.” These considerations may involve determining whether and how to classify NFTs as commercial assets or applying rules relating to self-created works. He suggests that “it is best to consult a tax professional who can help you fulfill your reporting obligations fully and accurately”.
The demand for NFT continues to grow. Buyers and sellers should be aware that the IRS will demand its share of this growing market. In the absence of clear regulatory guidance, taxpayers should be extra cautious and consider relying on professional advice to ensure they meet their tax obligations.
Thomas Walch is based in Palisades Hudson’s Atlanta office and has been with the firm since 2011. In addition to financial planning, asset management and tax preparation, he is a member of the firm’s Entertainment and Sports team. Walsh has contributed to Palisades Hudson’s books “The High Achiever’s Guide to Wealth” and “Looking Ahead: Life, Family, Wealth and Business After 55” (both available on Amazon). His advice has appeared in publications such as US News & World Report, The Pittsburgh Post-Gazette and Investor’s Business Daily.
Contact: Amy Laburda, [email protected]
SOURCE Palisades Hudson Financial Group LLC