Cryptocurrency purchases made in fiat currencies are not subject to any type of IRS tax reporting according to the IRS FAQs on cryptocurrency (Q5) updated as of March 2, 2021. 

For example, say Sam purchased 1 bitcoin (BTC) in 2020 for $1,000 and held it throughout the year. According to the updated FAQ-Q5, Sam is not required to check “yes” on the infamous virtual currency question appearing on the front of Form 1040 – “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”. Sam can safely answer “No” on the question.

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Prior to this updated guidance from the IRS, taxpayers were confused whether purchasing cryptocurrency in USD would require them to