I’ve been exploring crypto recently and was researching the laws surrounding taxation of crypto, particularly in the US. I saw that receiving and holding crypto typically isn’t taxed but if you want to send, exchange or purchase anything with it, that’s a taxable event.
As such, I just wanted to ask if anyone knows whether using BAT to tip creators is covered by that or not.
If it is, then I’ll probably just have to cash it out for fiat rather than using it to tip.
I am not a tax adviser.
But I believe that if you tip someone, it is a taxable event for the person receiving it, not the person donating it.
It is different if you use BAT to purchase anything, convert or cash out.
Doing anything with it is just about taxable. The way it’s phrased can be a headache. I went to respond to you last night but then removed my reply as everything is iffy. Any transaction, which includes you converting to fiat, is taxable. Keep in mind that even receiving crypto in general becomes an asset you gained and therefore taxable. The only debate is when it needs to be reported and if it becomes taxable upon receipt or only once it’s converted.
Keep in mind that while some places say that receiving crypto as a gift or purchasing it isn’t taxable, it does spell out that it’s taxable if you receive it as income then it has to be reported. Whether it be receiving it as rewards, in exchange for goods or services, etc it’s all taxable events.
To quote from the IRS:
Transactions involving a digital asset are generally required to be reported on a tax return.
Taxable gain or loss may result from transactions including, but not limited to:
- Sale of a digital asset for fiat
- Exchange of a digital asset for property, goods, or services
- Exchange or trade of one digital asset for another digital asset
- Receipt of a digital asset as payment for goods or services
- Receipt of a new digital asset as a result of a hard fork
- Receipt of a new digital asset as a result of mining or staking activities
- Receipt of a digital asset as a result of an airdrop
- Any other disposition of a financial interest in a digital asset
- Receipt or transfer of a digital asset for free (without providing any consideration) that does not qualify as a bona fide gift
- Transferring a digital asset as a bona fide gift if the donor exceeds the annual gift exclusion amount
One could argue you’re receiving BAT in exchange for goods or services. Your services are viewing ads that are being delivered to your browser. Even if you want to say that doesn’t qualify, then it would fall under the idea of receiving a digital asset for free that does not qualify as a bona fide gift.
AKA, receiving any BAT payouts is taxable. This is part of the reason why Uphold recently required all USA residents to complete a W9. https://support.uphold.com/hc/en-us/articles/9814296851227-W9-Tax-Form
The big trick is all about how much. Usually amounts are petty enough that we can get by without reporting. I mean, it’s like $5/mo in BAT, which is around $60 a year, give or take. The IRS usually isn’t going to be hounding anyone about that petty amount. Technically we’re supposed to report it and there could be legal issues by not doing it, but the likelihood is slim.
All of that said, if you’re sticking to the law 100%, then any BAT you earn should be reported. But you probably should speak to a tax professional, lawyer, or even to the IRS directly to have the best answers.
Thanks for the responses, I’m not one of those sticklers for law but I just don’t want to get in trouble. Tax laws are ridiculous (as is the word filter, if I’m being honest; had to rewrite this part). It ain’t right that you can get locked up simply for accidentally forgetting to report something, especially when a lot of that money isn’t doing anything to benefit us as citizens. Anyways, rant over, thanks again!