Understanding IRS Guidelines on Cryptocurrency Payments for Microtasks

The Taxman Cometh: What You Need to Know

In a world where digital assets are becoming as common as your daily coffee run, the IRS has come out swinging with its latest memorandum. On August 28, they clarified something that should be abundantly clear (but apparently wasn’t): if you earn cryptocurrency for performing tasks—no matter how small—this counts as taxable income. Spoiler alert: that shiny Bitcoin you thought was a freebie? Yeah, not so much.

What’s Considered Taxable Income?

If you receive convertible virtual currency as compensation for microtasks—those delightful mini-tasks you see popping up on crowdsourcing platforms—you’re officially in the IRS’s crosshairs. According to the IRS memorandum, you must report that crypto as ordinary income on your tax return. Here’s how they break it down:

• Convertibility: If it can be converted into fiat currency (like dollars), it’s fair game.
• Payment for Services: Any virtual currency received is deemed payment for a service rendered.
• Self-Employment Tax: This might apply if you’re hustling freelancers—yup, it stings a little more.

Defining Crowdsourcing and Microtasks

The IRS defines crowdsourcing as calling upon the community to tackle a shared project. It can consist of anything from data entry tasks to creative contributions. Microtasks, in particular, are small segments of a larger project and can easily fit within the gig economy framework.

So, if you’re doing any of the following, listen closely:

• Beta testing apps
• Participating in surveys
• Transcribing audio files

The IRS’s Vision: Closer Scrutiny

This memorandum isn’t just a friendly reminder to keep your accountant in the loop. The IRS has been ramping up its scrutiny over cryptocurrency transactions like a nosy neighbor peering over the fence. They previously added questions to the 2020 tax forms asking if citizens interacted with digital assets at all—but now, this goes deeper.

What Does This Mean for You?

In short, if you’ve been buzzing around earning cryptocurrency for side hustles, don’t let your crypto dreams vanish in a puff of smoke come tax season. Beyond the risk of a slap on the wrist from Uncle Sam, keeping track of your earnings ensures that you remain compliant.

We suggest:

1. Keep a detailed record of any crypto received from tasks.
2. Consult a tax professional who understands cryptocurrency to avoid any surprises.
3. Stay up-to-date with IRS news—after all, tax laws can change faster than the value of Bitcoin!