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Crypto Taxes
Crypto Taxes

How to Report Twitter Bitcoin Tips on Your Tax Return

Twitter now allows users to send Bitcoin tips with zero fees. 

Twitter recently unveiled the option for users to give tips through Strike, a payment processor built on the Bitcoin Lightning network. 

While it sounds like a great way to increase crypto adoption, there is one thing you should keep in mind before sending your first Bitcoin tip: the tax implications. In this guide, we’ll break down how Bitcoin tips are taxed for senders and recipients and share an easy way to report all your Bitcoin transactions on your tax return. 

How do Bitcoin tips on Twitter work? 

If a Twitter user enables Tips on their account, you’ll be able to see the option next to the ‘Follow’ button on their Twitter pages. If you click this link, you’ll be taken off of Twitter to a third-party payment processor. 

Twitter allows users to send ‘tips’ in fiat currency through platforms such as Venmo, Cash App, and GoFundMe. Twitter also supports the option for users to send and receive tips from Strike, a payment processor built on the Bitcoin Lightning network. 

In addition, Twitter gives users the option to directly add their Bitcoin address to their Twitter profile. 

I received a Bitcoin tip on Twitter. How is this taxed? 

Based on existing laws, it’s possible that Bitcoin payments on Twitter may be taxed differently for average users and professional content creators. 

Receiving Bitcoin tips as an average user

Typically, when Bitcoin is given to another person out of ‘detached and disinterested generosity’ and without expectation of a product or a service, it’s considered a gift. At this time, receiving a Bitcoin gift is not a taxable event. 

Since Bitcoin tips on Twitter are given to other users with no strings attached, it’s reasonable to assume that they fall into the ‘gift’ category. 

Receiving Bitcoin tips as a professional content creator 

It’s possible that Twitter tips may be taxed differently for professional content creators, though this is a gray area. In the past, content creators have reported ‘tipped’ income from platforms like Twitch as personal income subject to income tax. 

However, some creators may argue that their fanbase is simply sending Twitter tips out of ’detached and disinterested generosity’, rather than sending them with an expectation of a product or service. 

If you’re not sure how to report the Bitcoin tips that you’ve received, reach out to a tax professional

I sent a Bitcoin tip on Twitter. How is this taxed? 

Sending a Bitcoin tip to an average user 

It’s reasonable to assume that sending Bitcoin tips to most users will be considered a gift. At this time, giving a cryptocurrency gift is not a taxable event. 

Typically, Bitcoin gifts are tax-free. However, you will need to file a gift tax return if the fair market value of your gift is more than $15,000. Filing this gift tax return does not mean that any tax liability will be due — the form is primarily for informational purposes. 

Sending a Bitcoin tip to a professional content creator 

Unfortunately, the tax implications of sending a Bitcoin tip to a professional content creator are not clear. While sending a Bitcoin gift is non-taxable, sending Bitcoin in exchange for goods or services is considered a taxable event, and you could realize capital gains.

The IRS has not given clear guidance on this issue. If you’re unsure how to report Bitcoin tips on your tax return, reach out to a tax professional. 

How do I report my Bitcoin tips on my taxes? 

At this time, Strike, the payment processor used for Bitcoin tax payments, does not offer tax forms to users. This means that reporting taxes on your Strike transactions will likely be difficult. 

Crypto tax software like CryptoTrader.Tax can help. You can import your transaction history from Strike and any other platform, wallet, or exchange you are using to keep track of your gains, losses, and income. Once all your information is uploaded, you’ll be able to generate a complete tax report in minutes. 

File your crypto taxes in minutes 

CryptoTrader.Tax is used by more than 100,000 cryptocurrency investors across the globe. The platform automatically integrates with exchanges like Coinbase, Kraken, and Gemini to make filing your crypto taxes feel stress-free. 

Get started with a free account today

Recently updated on
October 31, 2021
Category:
Crypto Taxes

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