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Most taxpayers report their foreign exchange gains and losses under Internal Revenue Code Section 988. This option is best if you posted a loss because you can take the full deduction in the current tax year. Foreign exchange losses can be deducted against all types of income.

According to IRS Notice 2014-21, the IRS considers cryptocurrency to be property, and capital gains and losses need to be reported on Schedule D and Form 8949 if necessary.

Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value.Virtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency, is referred to as convertible virtual currency.

In some environments, it operates like real currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any

For now, the IRS regards bitcoin and other cryptocurrencies like property. So, if you bought bitcoin and held it all, you don't need to report that on your tax return. "The bottom line is that the IRS is looking for taxable transactions. So if you have a taxable transaction, you should be checking 'yes.

For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. In general, if you sold crypto, you'll need to report like a stock sale, including the costs and dates when you purchased and sold it.

You need to answer yes if you sold, exchanged, mined or made purchases with digital currency. If you don't report taxable transactions and face an IRS audit, you may incur interest, penalties or even criminal charges, experts say.