Virtual currency transactions must be reported in U.S. dollars and taxpayers must determine the fair market value as of the date of payment or receipt, according to a list of frequently asked questions issued by the agency.

Among other positions taken by the IRS: wages paid to employees in virtual currency must be reported employers on Form W-2 and are subject to federal income tax withholding and payroll tax. Similarly, payments to independent contractors are taxable.

The IRS says whether a gain or loss stems from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer. A payment made using virtual currency is also subject to information reporting to the same extent as any other payment made in property.