You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the taxable year of the transaction, regardless of the amount or whether you receive a payee statement or information return such as a Form W-2 or Form 1099.
For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. This means that if you receive virtual currency as payment for goods or services, you must include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received, in your gross income. If you sell or exchange virtual currency, you must recognize any gain or loss on the transaction. The character of the gain or loss (capital or ordinary) depends on whether the virtual currency is a capital asset in your hands.
For example, if you receive virtual currency as payment for services performed as an independent contractor, the fair market value of the virtual currency received constitutes self-employment income and is subject to self-employment tax. If you receive virtual currency as wages, it is subject to federal income tax withholding, FICA tax, and FUTA tax, and must be reported on Form W-2.
Additionally, if you engage in a transaction involving virtual currency, such as selling, exchanging, or otherwise disposing of it, you must report the transaction on your tax return for the year in which the transaction occurred. This includes transactions where you receive virtual currency from mining or staking activities, or from a hard fork or airdrop.
To summarize, you must report all taxable transactions involving virtual currency on your federal income tax return for the year in which the transaction occurred, regardless of whether you receive a payee statement or information return.
Sources:
Notice 2014-21
Rev. Rul. 2019-24
Publication 544 (2023)
Issues in the Taxation of Cryptocurrency
FS-2024-12
