The latest crypto tax update from the United States’ Internal Revenue Service (IRS) has informed that digital currencies earned from performing menial activities on crowdsourcing platforms are taxable. The tax agency sees cryptocurrency as a property for federal income tax purposes and says general property-related tax principles apply to them as well.
IRS shades more light on crypto tax
The development, which clarifies more on what cryptocurrency jobs are taxable, follows a question on June 29 by the agency’s Small Business/Self Employed Division. The question demanded clarification on whether cryptocurrencies earned for performing microtasks through crowdsourcing platforms are taxable income.
In a recent memorandum, the IRS’s Office of Chief Counsel gave its response, as Ronald Goldstein, the memo author, and senior technician reviewer at IRS noted:
“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.”
Crypto tax applies to microtasks
Following the memo, the IRS recognized cryptocurrency as a digital form of value that functions as a medium of exchange, including as a store of value. Thus, these cryptocurrencies like Bitcoin, are considered property for federal income tax purposes in accordance with section 61(a) of the IRS tax code. This means that the general tax principle for property transactions which equally apply to them.
One of the examples of microtasks given in the memo includes scenarios where workers are offered Bitcoin as payment for reviewing images or to process data. Goldstein did mention that the value of cryptocurrency paid to such workers can also be small to as low as $1. The IRS is actively working towards its crypto tax laws. Recently, it issued a statement to on-board consulting services to facilitate taxpayer examinations that involve cryptos.