As the April 18th deadline for filing federal taxes fast approaches, the IRS is reminding taxpayers of a few atypical filing requirements. Any money earned from part-time work that is paid in any form or that is not reported on an income statement is all subject to taxes. In addition to regular wages, tips and bonuses, taxpayers are reminded that income tax must also be paid on funds that come from other sources that included, but are not limited to, money raised through crowdfunding campaigns and cryptocurrency.
All funds raised through crowdfunding sites such as GoFundMe, Indegogo and Pateron, as well as others, must be reported as income to the Internal Revenue Service. The IRS says that taxpayers who collected over $20,000 with over 200 donations should report the income using the 1099-K provided from the crowdfunding organization. Starting in the 2022 tax year the reporting threshold for crowdfunding donations has been lowered to $600, however, this does not impact taxpayers until they file their 2022 return in 2023.
Virtual funds are consider currency by the IRS and as such any gains are taxable under federal guidelines. All transactions that involve any type of sale, exchange or receipt of virtual currency, such as Bitcoin, Ethereum, Solana and DOT must be reported on Form 1040 or Form 1040-SR.
According to the Pew Research Center, roughly 16 percent of American taxpayers have earned money through some type of online freelance site with approximately 30 percent of those people reporting working through these services was their main source of income in 2021. Any taxpayer who received $600 or more in payments for goods and services through online processors, like PayPal or Venmo, will need to report that money as taxable income. People who work through online freelance sites like GigWalk, Shipt shoppers or Uber and Lyft as well as any other freelancers who are paid online must report that money as income to the IRS.
There’s Still Time
In a news release the IRS also reminded taxpayers who did not file a 2018 return by the deadline that they still have time to claim refunds due them from previous years. Every year millions of dollars goes unclaimed by taxpayers who may not have earned enough money to be required to file a return, but nonetheless had taxes taken out of their paychecks. For example, in just the state of Michigan alone there was over $47 million in refunds that went unclaimed for the 2018 tax year belonging to nearly 50,000 Michiganders.
Federal tax law stipulates most taxpayers have a three-year window to claim their federal tax refund. However, if taxpayers do not file their return within the three year grace period they will forfeit their refund and the money then becomes the property of the U.S. Treasury Department. With less than three weeks left to go until this years filing deadline, the IRS reports refunds are averaging about 13 percent higher than the same time in 2021 at approximately $3,300 per refund.