Cryptocurrency Earned From Carrying Out Microtasks Is Taxable, Says IRS Memo

The U.S. tax department has provided guidance around crypto revenue earned from microtasks via crowdsourcing platforms and, yes, such income is taxable.

AccessTimeIconAug 31, 2020 at 7:31 a.m. UTC
Updated Sep 14, 2021 at 9:49 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Cryptocurrency earned from carrying out small tasks valued as low as $1 is taxable, the U.S. Internal Revenue Service (IRS) said in a memo Friday.

  • In a memorandum first reported by The Block, the IRS' Office of Chief Counsel published a response to a June 29 request for clarification from the tax agent's own Small Business/Self Employed Division.
  • The question centered around whether crypto earned by an individual for performing a microtask through a crowdsourcing or similar platform was a taxable income.
  • "Yes," said Ronald Goldstein, IRS senior technician reviewer and memo author, "the convertible virtual currency received is taxable as ordinary income."
  • Goldstein added that cryptocurrency "acts as a substitute for real currency" and is therefore considered property for federal income tax purposes pertaining to section 61(a) of the IRS tax code.
  • An example of microtasking included a company offering to pay workers in bitcoin for processing data or reviewing images.
  • The value of crypto paid in exchange for microtasks are often small amounts that could be less than $1.
  • Other examples included downloading an app and leaving a positive review; downloading games and reaching particular milestones; completing online quizzes; or registering accounts with various online services.
  • According to the memo, these types of microtasks "may provide individuals with rewards" in the form of cryptocurrency and are thereby subject to the same regulations as regular money.
  • The guidance comes at a time when the tax agency has been in crackdown mode to end suspected crypto tax avoidance, seemingly contradicting the advice of its own watchdog.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.


Read more about