Got Paid with Cryptocurrency for Microtasks? You May Owe the IRS
A cryptocurrency attorney can confirm that the Internal Revenue Service has distinctly stated its position on cryptocurrency earned from microtasks. A memo written at the end of June and published on the 28th of August indicates that taxpayers earning cryptocurrency from microtasks completed on crowdsourcing platforms can expect to be taxed on their income.
The author of the memo, Ronald Goldstein of the Income Tax and Accounting Division, stated in his correspondence that taxpayers receiving convertible virtual currency for the aforementioned tasks are being paid to perform a service, according to the law. Therefore, the income is taxable, and the same tax laws that apply to traditional wages also apply to wages paid with cryptocurrency.
Numerous Microtasks Commonly Paid With Virtual Currency
Goldstein notes that an individual may be paid in convertible virtual currency, such as bitcoin, for numerous microtasks. Some examples include:
- Reviewing images or processing data
- Completing online surveys and quizzes
- Downloading a specific app for the purpose of leaving a positive review
- Reaching certain milestones after downloading and playing a particular game from an app store
- Creating an account with an online merchant
- Commenting on a particular website
There are also in-depth microtasks for which an individual might be paid in cryptocurrency, and the amount of compensation varies greatly from one to the next.
In certain instances, payment in virtual currency for microtasks is referred to as “rewards,” but a cryptocurrency tax attorney would probably warn individuals that such payment is still viewed as taxable by the IRS. Of course, depending on the amount, it may not reach the level of taxable income. For instance, a single microtask may only earn taxpayers the equivalent of one dollar in virtual currency, and therefore, depending on how many tasks they complete, their income may never reach a taxable level.
As Goldstein notes later, Section 61(a)(1) provides that all gross income, regardless of the source from which it is derived, must be included on taxpayers’ tax returns if they are required to file that year.
Cryptocurrency Taxable Property Since 2014
Cryptocurrency may also be regarded as capital gains. The rationale behind taxing cryptocurrency as capital gains or taxable property stems from that part of the law that says taxpayers who perform microtasks through crowdsourcing platforms have done so with the expectation of receiving compensation. If the compensation comes in the form of convertible virtual currency, the individual has been compensated with property. There are also additional tax implications based on the fact that the value of cryptocurrency, such as bitcoin, may fluctuate over time. Since 2014, the IRS has regarded bitcoin and other cryptocurrencies as a form of taxable property.
In 2019, for the first time, the IRS issued letters to United States taxpayers who failed to correctly report cryptocurrency transactions. Speaking to a bitcoin tax attorney is the best course of action for those who are unsure of whether or not they have earned taxable income by receiving cryptocurrency.
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