Virtual currencies such as Bitcoin or other "cryptocurrencies" are taxed differently from cash or coin currency.
The IRS generally recognizes virtual currency as property, not legal tender. As such, virtual currency received as payment by an individual or business must be included as miscellaneous income as an exchange of property or service. The value of the payment is determined by the Fair Market Value (FMV) on the date of receipt. The virtual currency must be translated to the legal tender equivalent and then included in income.
Per IRS Instructions for Form 1040 and 1040-SR, page 16:
Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. If a particular asset has the characteristics of a digital asset for federal income tax purposes.
Check the "Yes" box next to the question on digital assets on page 1 of Form 1040 or 1040-SR if an any time during 2022 you (a) received (as a reward, award, or payment for property or services); or (b) sold, exchanged, gifted, or otherwise disposed of a digital asset (or any financial interest in any digital asset).
For example, check "Yes" if at any time during 2022 you:
The following actions or transactions in 2022, alone, generally don’t require you to check “Yes”;
Do not leave the question unanswered. You must answer “Yes” or “No” by checking the appropriate box. For more information, go to IRS.gov/virtualcurrencyfaq.
Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.