Non-fungible tokens (NFTs) and stablecoins are now included in the United States’ Internal Revenue Service’s (IRS) tax bracket for digital assets.

Virtual currency was replaced with “digital assets” in the category in a draft of the tax agency’s guidelines for 2022. With the new name comes a fresh perspective on the category and a broader range of items that Americans must tax.

Any digital representations of value that are kept on a distributed ledger that is cryptographically secure, or any equivalent technology, are referred to as “digital assets.” According to the proposal, digital assets include things like stablecoins, cryptocurrencies, and non-fungible tokens (NFT).
Previously, the IRS was exclusively concerned with digital currency. Virtual money, according to the agency, used to be defined as “digital tokens that serve as a unit of account, a store of value, or a medium of exchange.”

Taxes will now need to be paid on any virtual currencies that were utilized as capital assets or for payments by taxpayers. This includes any American who used a digital currency to make a purchase, received a reward in the form of a digital asset, exchanged a digital asset for money or another digital asset, or obtained additional digital assets through mining or staking block rewards.

What kind of tax a person pays will depend on how they employed their digital assets throughout the fiscal year. Depending on whether they were retained as assets or sold to other customers, they may be regarded as either capital gains or income. For those who received payment in digital assets or who sold them to customers, the first rule will apply.

This information is timely because the IRS is increasing up its efforts to collect taxes on digital assets. A New York judge issued a summons to M.Y. Safra Bank last month requesting that they provide the IRS with information regarding US taxpayers who had overstated or failed to pay their digital asset taxes.
“One of the most important tools for detecting tax cheats continues to be the government’s capacity to get third-party information on those who are neglecting to register their gains from digital assets. “Taxpayers who receive revenue from the sale of digital assets must meet their filing and reporting obligations,” said IRS Commissioner Charles Rettig at the time.