The IRS wants to tax every penny of your crypto, U.S. government memorandum says.
There has been a recent memorandum from the U.S.' tax authority, the Internal Revenue Service, or IRS. It has attempted to clarify taxation rules around receiving crypto assets as payment.
In February 2020, the Wall Street Blockchain Alliance (WSBA) has the IRS to clarify its crypto tax categorization.
The document was released on 28 August 2020. It posed a question. It asked whether convertible virtual currency received by the individual is taxable income? The conditions are when it is received for performing a microtask. Also, when it is received through crowdsourcing or similar platforms.
It has attempted to answer the question itself. It says that the convertible virtual currency received by the individual is taxable. It does not matter if it has been received through a crowdsourcing platform for a microtask. This is because the individual has received consideration in exchange for a service. Thus, it is taxable as ordinary income.
The focus of the document is on crowdsourcing. Crowdsourcing involves calling on many participants to work on a project or task. It is a standard business model in the Blockchain space. The document described microtasks as smaller bits of work dished out to many workers. This is done as part of a larger task.
Regardless of the makeup, the memorandum pushes one central point. It is that payment in cryptocurrency, large or small, is taxable income. The virtual convertible currency received must be reported on the taxpayer's income tax return as ordinary income. It may be subject to self-employment tax.
The document surfaced as an internal IRS document on 29 June. But it was not made public until months later on 28 August.
The Internal Revenue Service has increasingly tightened its overwatch on crypto in recent years. One of the latest developments sees 2020 U.S. tax forms. It asks citizens to disclose if they have interacted with digital currency over the most recent year.
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