Today, a growing number of employees and contractors are being paid in cryptocurrency for work that they provide. Cryptocurrency received from employment or other work you provide would be considered ordinary income under US tax law.
It is taxed at the fair market value at the time you have dominion and control (generally when it is received). It is then reported on your tax return as ordinary income, like a regular pay-check or freelance income (depending on the nature of the income). The IRS will tax you according to your income tax bracket on the income that is received.
Example: Louise gets paid 1 BTC on 01-31-2022 for working at Crypto-corp. When this BTC arrives in her wallet, she checks the current market value of that asset ($50k). $50k is recorded as ordinary income.
The IRS states: “A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received.”
Remember - if you use a crypto asset which you received as payment to purchase goods or serviced before exchanging to a fiat currency you will need to follow the rules on 'Purchases using Crypto' as well as income.
Example of employment income in Recap