Posted 7 months ago | by Ben Armstrong
The IRS will Tax all Crypto Earnings According to Recent Memo
A memorandum was published by the Internal Revenue Service (IRS) on August 28 answering an inquiry, clarifying that crypto earnings are taxable by law.
The inquirer asked:
“Tax consequences for an individual who receives convertible virtual currency for performing microtasks through a crowdsourcing or similar platform.”
The IRS defines the act of crowdsourcing as a platform that allows firms to outsource work to a group of workers that can accept and submit jobs upon said platform. The arrangement would consist of the vendor who operates the platform, and firms and workers who facilitate transactions.
The Government Wants Your Money
The agency also defines microtask as jobs that are often paid in small increments ranging from a dollar or less. The document gives examples such as payment in exchange for downloading an app and giving a positive review, completing online surveys and quiz or registering accounts for online services.
The IRS considers crypto earnings a part of gross income and will be taxable by law under Section 61(a)(1).
The memorandum stated:
“Yes, a taxpayer who receives convertible virtual currency in exchange for performing a microtask through a crowdsourcing platform has received consideration in exchange for performing a service, and the convertible virtual currency received is taxable as ordinary income.”
Changes are Coming for US Taxpayers
More than a week before the memorandum was published, the IRS had released a draft tax form, requiring citizens to disclose their interaction with cryptos within 2020.
“At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
Responding to the media, executive at Cointracker, a crypto tax software, Chandan Lodha expressed the intense view that the IRS is taking up cryptos in recent months.
“The cryptocurrency question is now front and center on the IRS Form 1040 for next year. Pretty clearly shows that the IRS is taking cryptocurrency taxes even more seriously,” Lodha said.
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