Reporting Gig income, Virtual Currency Transactions

 Reporting Gig income, Virtual Currency Transactions 

Taxpayers are required to report gig income, virtual currency transactions, foreign-source income, or holding certain foreign assets.  

Gig earnings are taxable 

The gig economy is activity where individuals earn income providing on-demand work, services or goods.  

Often it is through a digital platform like an app or website.  

Taxpayers must report income earned from the gig economy, even if the income is: 

• From part-time, temporary or side work, 
• Not reported on an information return form - like a Form 1099-K, 1099-MISC, W-2 or other income statement or 
• Paid in any form, including cash, property, goods or virtual currency. 

Virtual Currency Reporting Requirements 

There is a question at the top of Form 1040 and Form 1040-SR asking about virtual currency transactions.  

All taxpayers must check the box indicating either “yes” or “no.”  

A transaction involving virtual currency includes, but is not limited to: 

• The receipt of virtual currency as payment for goods or services provided; 
• The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift; 
• The receipt of new virtual currency as a result of mining and staking activities; 
• The receipt of virtual currency as a result of a hard fork; 
• Exchange of virtual currency for property, goods,, or services; 
• An exchange/trade of virtual currency for another virtual currency; 
• A sale of virtual currency; and 
• Any other disposition of a financial interest in virtual currency. 

If any virtual currency held was sold or disposed of through a sale, exchange ,or transfer, the required question should be checked “Yes” and report those sales/dispositions on federal form 8949 and report the gain or loss on Schedule D (Form 1040). 

Virtual currency received as compensation for services or that were disposed of by virtual currency held for sale to customers in a trade or business must be reported as income, in the same manner, it would be reported as with any other income of the same type (for example, W-2 wages, Schedule C, etc).