Bitcoin

The IRS wants to tax every penny of your cryptocurrencies

A recent memo from the U.S. tax authorities, The Internal Revenue Service (IRS) tried to clarify the tax rules for receiving crypto assets as a payment method.

“Is the convertible virtual currency that a person receives for performing a micro-task through a crowdsourcing platform or the like a taxable income?” says the document released on August 28, adding:

“Yes, a taxpayer who receives convertible virtual currency in exchange for performing a micro-task through a crowdsourcing platform has received payment in exchange for providing a service, and the convertible virtual currency received is taxed as ordinary income.”

Crowdsourcing, in which several participants are asked to work on a project or task, is a widespread business model in the blockchain space. In the memo, microtasks were described as small work blocks that were handed over to several employees as part of a larger task.

The IRS wants to tax every penny of your cryptocurrencies
The IRS wants to tax every penny of your cryptocurrencies

Regardless of the composition, the memo emphasizes one main point: Payment in cryptocurrencies, no matter how large or small, is taxable income. “The virtual convertible currency received must be declared as ordinary income on the taxpayer’s tax return and may be subject to self-employment tax,” the document concludes.

The memo appeared as an internal IRS document on June 29. but it wasn’t released until a few months later, on August 28th to be precise.

The IRS has increased its vigilance regarding cryptocurrency revenues in recent years. One of the latest developments is that the 2020 U.S. tax forms are asking citizens to say whether they have interacted with digital assets over the past year.

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