Yes, the IRS can tax bitcoin and other cryptocurrencies. What you need to know

Even though you can buy things with bitcoin, it’s not the same as cash. At least not in the eyes of the IRS.

Virtual currencies are taxed as property, or as an investment, when you sell them. And using them to buy something counts as selling.
If you’re paid in bitcoin, on the other hand, that will be treated as taxable income to you.
Indeed, almost every transaction may be taxable and should be reported.
While bitcoin and other cryptocurrencies may be virtual, they have very real-world tax consequences. If you fail to pay the tax you owe, you will be subject to interest and penalties and, in some circumstances, even criminal prosecution.
So if you couldn’t resist getting in on bitcoin’s wild ride in 2020 — it went up about 680% over the past year and has been trading north of $55,000 recently — let’s hope you kept good records, because you are responsible for preserving documentation for every one of your transactions.

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