Pennsylvania Court Convicts Taxpayer for Failure to Report and Pay Tax on NFT Transaction

As a reminder on the importance of reporting transactions involving virtual currency and digital assets, a taxpayer recently pled guilty in the U.S. District Court for the Middle District of Pennsylvania (in U.S. v. Waylon Wilcox) to criminal charges for failing to report and pay taxes on digital artwork transactions. The taxpayer in Wilcox acquired and sold 97 pieces of digital artwork, or non-fungible tokens (NFTs).  In both 2021 and 2022, he answered "no" to the Form 1040 question that now asks whether the taxpayer, at any time during the year, had received, sold, exchanged, or otherwise disposed of any digital asset or financial interest in any digital asset.  He also failed to report the several million dollars in profit he had made when selling the digital assets over a two-year period. The case was investigated by the IRS Criminal Investigation division.  Following the guilty plea on two counts of filing false individual income tax returns, the taxpayer now faces up to six years in prison, supervised parole and financial penalties.  For more information on the reporting requirements applicable to digital assets, visit Tax Facts Online. Read More: Link to Q7724.  Note: Q is updated.