IRS Crypto Rules: What You Must Know About Taxing Bitcoin and Altcoins

When the IRS crypto rules, the U.S. Internal Revenue Service’s official stance on how cryptocurrency transactions are taxed under federal law. Also known as crypto tax regulations, they treat digital assets as property, not currency—meaning every trade, sale, or swap can create a taxable event. This isn’t just about Bitcoin. If you’ve bought, sold, staked, or received crypto as payment, the IRS wants to know.

Most people don’t realize that swapping ETH for SOL is a taxable transaction. The IRS doesn’t care if you didn’t cash out to dollars—you still triggered a capital gain or loss based on the fair market value at the time of the swap. Same goes for earning interest on stablecoins, receiving airdrops, or getting paid in crypto for freelance work. Each of these actions has a paper trail the IRS can track through exchange records, blockchain analysis, and third-party reporting. Even if you didn’t get a 1099, you’re still required to report it. The crypto reporting, the process of disclosing cryptocurrency transactions to tax authorities using IRS forms like Form 8949 and Schedule D isn’t optional anymore. The IRS has been auditing crypto users since 2019, and they’ve been matching data from Coinbase, Kraken, and other major exchanges with tax returns.

What about airdrops? If you got free tokens from a project, that’s ordinary income based on the value when you received them. Staking rewards? Also income. Mining crypto? Taxable at fair market value when mined. The Bitcoin taxation, the specific application of IRS rules to Bitcoin transactions, including buying, selling, and using BTC as payment rules apply the same way to every coin. There’s no special exemption for Ethereum, Solana, or Dogecoin. The real danger? Not reporting. The penalty for failing to check the crypto question on Form 1040 can be $25,000 per year. Even if you think you’re below the radar, the IRS now has tools to trace wallet activity across blockchains.

You don’t need to be a tax expert to stay compliant. Start by tracking every transaction—buy, sell, swap, receive. Use free tools or simple spreadsheets. Know your cost basis. Know your sale price. Know when you made a profit or loss. The cryptocurrency compliance, the set of actions and records needed to meet IRS requirements for digital asset reporting and tax payment isn’t about guessing. It’s about documenting. The posts below show you exactly how real users got caught, how to avoid common mistakes, and what the IRS actually looks for when reviewing crypto returns. You’ll find breakdowns of audit cases, how to handle hard forks, and why ignoring a small airdrop can cost you more than the token was worth.