Enter the income as an "Incentive Payment". It will be listed on line 8 of your 1040.
When you sell or trade it, you may need to recognize a gain or loss on the transaction.
If you use it to make a personal purchase, that transaction won't be reported UNLESS the value of this virtual currency is up when you use it, then you are taxed on the gain.
Go to the Wages & Income section
Scroll down to the VERY LAST option "Less Common Income" and click Show more
On this new drop-down list scroll down to the VERY LAST option "Miscellaneous Income" and click START
Now scroll down to the VERY LAST option "Other reportable income" and click Start
Select YES on the "Any Other Taxable Income?" screen
Type "Crypto Incentive" and the amount.
Now your "basis" is $5, if it is traded at $7, you have a $2 gain, if you sell at $3, you have a $2 loss.
If you buy a $2.50 coffee with it and it's still worth $5, (so you only use half) nothing to report.
If you buy a $2.50 coffee with it and it's worth $10, you have a 2.50 gain (because it doubled in value)
If you buy a $2.50 coffee with it and it's only worth $2,50, you have nothing to report. You can't claim a loss when using it for a purchase. (You COULD have sold it for 2.50, claimed a 2.50 loss, THEN bought your coffee)
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