Self employed being paid in crypto

[Just-Lisa-Now-]

Got an email from self employed client:

"I have a client wanting to make a payment to me using a currency called  “coin base”. Also known as USDT (US dollar token). Once I were to receive the funds that money would technically be in an investment account through “coinbase”. If I were then transfer that USDT into USD into my bank account would I be taxed a capital gain?"

This is business income to him, right?   Then if he leaves it in the account any gains or losses would be capital gains/losses somewhere down the line when he takes the money out?  His basis would be the value that they guy transferred to him and he included as business income?

[Terry53029 · Accepted solution]

You got it Lisa, I took the IRS seminar on Bit Coin, and they consider it property, so your client is trading services for property which he includes in income at fair market value. When he sells the property he will have a short or long term gain, and his basis is what he claimed as income at time of his exchange

[Just-Lisa-Now-]

thank you!

[qbteachmt]

Coinbase is the exchange service (like Bank) and not the currency, though. It's like having your client pay you through PayPal, for instance.

USDT is the symbol for Tether, one of the cryptocurrencies.

The Currency will be considered as Basis Value on the date of payment, which is whatever he charged them for the work or his agreement to accept this value in lieu of what he charged.

Then, when he converts it to US dollars, he has gain or loss on the currency exchange.

[PATAX]

Great information in all of this post.. Should be read by all... I believe El Salvador just recognized cryptocurrency or Bitcoin as official currency unless it is some kind of nonsense news.... It looks like cryptocurrency is gaining popularity and we will have to deal with it more and more in the future...

[dascpa]

From my prior post - CoinBase in an investment house for cryptocurrency.  The tax reporting is done through a separate [paid] service called CoinTracker.  Without it you will not have the proper info to report on Sch D/8949.