Cryptocurrencies have gone mainstream.

For example, you can use bitcoin to buy far more than you would think. To see, try googling “What can I buy with bitcoin?” You will get more than 350,000 hits.

But using cryptocurrencies has federal income tax implications that may surprise you.

With the price of bitcoin having gone through the roof (before its recent decline), and with increasing acceptance of bitcoin and other cryptocurrencies as forms of payment, the tax implications of using cryptocurrencies are a hot-button issue for the IRS. This article explains what you need to know. Here goes.

First Things First: What Is Cryptocurrency?

Cryptocurrency is “digital money” usually issued and controlled by software developers and accepted as payment by willing parties.

Also known as virtual currencies, cryptocurrencies can be transferred, stored for future use, held for investment (if you consider making bets to be investing), or traded electronically.

Bitcoin is the most well-known example. Unlike conventional currencies such as the U.S. dollar or the euro, cryptocurrencies are essentially unregulated. ... Log in to view full article.