Cryptocurrency is “a substitute for real currency,” and any “convertible virtual currency received is taxable as ordinary income,” a recently published memo from the US Internal Revenue Service (IRS) has declared.
The new clarification by the IRS was made in response to a request for clarification from the US tax collector’s own Small Business/Self Employed department centered around how individuals who receive cryptocurrency as payment for “performing microtasks through a crowdsourcing or similar platform” should be taxed.
And judging from the IRS’ answer, all such earnings are both reportable and taxable, no matter how small and insignificant they may be. The principle also applies for microtasks that pay even just tiny amounts “that may be less than $1.”
“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,” the tax agency wrote.
In conclusion, the letter from the IRS’ Office of Chief Counsel further added that “If
the taxpayer receives convertible virtual currency for performing the task, regardless of
the value and the manner in which it is received, then the taxpayer has been
compensated with property.”
“The convertible virtual currency received must be reported on the taxpayer’s income tax return as ordinary income and may be subject to self-employment tax,” the official IRS memorandum stated.
The declaration from the IRS comes after it was revealed earlier in August that the tax agency on its latest Individual Income Tax Return (Form 1040) has moved a question about crypto transactions to the first page of the form – a change that by some has been seen as the IRS “taking action” to crack down on crypto-related tax evasion.
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Learn more:
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South Africa Might Impose Tighter Crypto Taxes Rules – Auditor
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