On Aug. 28, the Internal Revenue Services (IRS) confirmed that crypto earned from microtasks via different crowdsourcing platforms are taxable income.
The financial regulator posted a memo in the response of an enquiry from the U.S Small Business Agency, who wanted to know if “convertible virtual currency” received by an individual in exchange for microtasks is taxable.
Ronald Goldstein, the author of the IRS memo, mentioned a variety of microtasks for which a contributor might earn crypto that would be taxable as ordinary income.
In detail, Goldstein cited that crypto yields from microtasks such as downloading games, completing online puzzles or surveys, and reviewing images for various online services, constitute taxable income.
The IRS has long refrained from declaring small incomes earned in crypto as taxable income. This latest clarification goes to show the tax agency’s desire to streamline the taxation process and impose far-reaching taxes on crypto gains.
IRS Seeks to Build Crypto Taxation Guidelines
The IRS has in the recent past worked to introduce guidance for taxpayers who engage in transactions involving cryptocurrency.
In 2019, the agency issued a guideline dubbed “Revenue Ruling 2019-24” which sought to help ordinary citizens understand their tax obligations when holding and trading crypto assets.
The IRS had previously made it clear that virtual currencies are considered as taxable capital assets, as long as they are convertible into cash.
More recently, in Feb of 2020, the IRS published essential steps for crypto owners to file their tax returns correctly. IRS Commissioner Charles Rettig noted at the time that his agency seeks to help taxpayers understand their obligations involving virtual currency.
Interestingly, the latest draft tax form for 2020 includes a question on cryptocurrencies at the very top of Form 1040, the main tax document used by about 150 million U.S. tax filers each year.
The question reads: “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
Crypto Lawyers Oppose Crypto Taxation Rules
The IRS has ramped up its efforts to collect more taxes from crypto owners. Last year, the agency sent around 10,000 letters to folks it suspected of withholding crypto-related taxes.
However, an independent agency consisting of crypto advocates opposed the letters, claiming that they violated taxpayers’ rights.
Similarly, crypto enthusiast Justin Winston challenged the crypto question on the latest IRS tax form. He argued that the government doesn’t have the right to know if an individual purchased, received, or acquired crypto because crypto is not just money.
Winston’s sentiments were echoed by tax lawyer Clinton Donnelly, who asserted that the crypto question goes beyond the IRS’s mandate and violates several of the taxpayer’s constitutional rights.