Cryptocurrency purchases made in fiat currencies are not subject to any type of IRS tax reporting according to updated FAQs on cryptocurrency from the IRS.
Prior to this updated IRS guidance (FAQ-Q5), confused taxpayers did not know whether purchasing cryptocurrency in USD would require them to check “yes” on the virtual currency question. This added guidance provides more clarity to taxpayers when answering this question moving forward.
FAQ-Q5 only applies to cryptocurrency purchased in fiat. If you purchase a cryptocurrency using another cryptocurrency, you would have to check “yes” on the Form 1040 question. Read more.