- A CryptoPunks NFT holder has admitted to underreporting profits on his tax forms
- Waylon Wilcox committed the crime in the 2021 and 2022 tax periods
- He faces up to six years in prison
Waylon Wilcox, a CryptoPunks NFT trader, has admitted that he lied to the IRS by underreporting his profits on his 2021 and 2022 tax forms. In the 2021 tax year, $8.5 million in profits were missing from his tax return; he left out another $4.6 million when filing his 2022 tax forms, and slashed his tax due by roughly $2.1 million in 2021 and $1.1 million in 2022. Wilcox faces “up to six years of imprisonment, […]supervised release [after] imprisonment, and a fine,” a case that may see the court award the highest penalty to discourage such behaviour among NFT and crypto traders.
NFT Sales Must Be Reported
According to the Department of Justice (DOJ), the NFT trader lied on his tax forms by indicating that he didn’t conduct NFT trading or related activities in 2021 and 2022. The DOJ said that a “taxpayer must report sales proceeds and any gains or losses from the sale of [an] NFT on their tax return.”
In 2021 and 2022, Wilcox sold 97 CryptoPunks, meaning that he underreported his income by more than $13 million based on the value of the NFTs at the time of sale. IRS’ Philadelphia Field Office Special Agent in Charge Yury Kruty said that the Wilcox case is part of the taxman’s mission to unravel “complex financial schemes involving […] NFT transactions designed to conceal taxable income.”
Trump Kills the IRS DeFi Broker Rule
Wilcox’s case comes a few weeks after the United States president Donald Trump denied the IRS’s request to expand its surveillance to decentralized exchanges and DeFi platforms through the now-repealed IRS DeFi broker rule.
With the IRS managing to catch Wilcox’s misrepresentation of his income tax and his involvement in NFT trading, it’s likely it will use the same tactic to catch more NFT and crypto traders who are deflating their income on tax forms to evade paying tax.
