NFTs, Business, Taxes

Accounting and Tax Planning for Generative NFT Drop Teams

No answers here, but a lot of questions — and, hey, that’s something.

Photo by Olga DeLawrence on Unsplash… LOL, see the year 2019 there? As if anyone had thought NFTs would explode a few years later, right?

Well, I just can’t believe I’m putting this out there as a Medium article, as it’s a tangential issue in the NFT space (at least as far as my involvement goes, as I’m a web3 dev specializing in generative art coding). BUT… look, frens, it’s important. And, both for you and for your investors, it’s just best to keep everything on the up-and-up.

I’ve made this point in a few pieces, but I feel so strongly about it that I wanted a dedicated opinion piece here on my feed. And the reason for this is because I’m in touch with teams worldwide, meeting with new teams each week, just as I’ve done for the past nine months (so far!). And I want them all to succeed long-term.

Back when I started — back in the ancient mid-2021 era of the NFT space — I used to get this question a lot in initial meetings:

“Ummmmm … so, are we gonna like 1099 you for the web3 dev and, uhhh, like, is the ETH we get gonna be taxed somehow? Because we’re kinda like, trying to just be anon here, you know?”

Yes, I know. Crypto is like that. Everyone wants to be anon (or, at least they used to). Heck, even today, you go to an NFT drop site and they’re all proudly touting their “Fully Doxxed Team!!!” at the top of the page … but when you scroll down to the team area, it reads like “Lead Dev: Crypto-Gangsta#123.

In what world is that doxxed?

Let’s be honest: The (main) reason for all of this is tax evasion. And, you know, I’m not blaming anyone for considering flying under the radar with crypto. I maintain a healthy frustration with the government’s oppressive tax rates just as much as the next guy.

The problem, though, is that you probably shouldn’t plan out a $2+ million project (think of that as a massive airplane with blinking red lights) and think you’re going to simply fly under Uncle Sam’s radar with it. (Or, substitute “Uncle Sam” with your own country’s taxing authority.) That strategy may have worked in 2017 or 2019, but the entire system is much more mainstream now, and they’re now paying serious attention to this.