IRS says Bitcoin is taxable as property, not currency

The IRS announced on Tuesday that bitcoins will be treated as taxable property, but not currency.

The reason largely stems from the fact that no country will take bitcoins as "legal tender," as it is not backed by gold or any government, but it still is seen as a virtual currency reports USA Today.

The IRS said, "Virtual currency is treated as property for U.S. federal tax purposes."

According to CNN, it means that while the exchange of bitcoins for legal currency won't be taxed, but people paid in bitcoins will have to report it on their W-2s as taxable income.

The IRS statement also notes that for reporting purposes, people can use the "fair market value" to determine the equivalent worth of their bitcoins. Due to a constantly changing value, that could prove to be somewhat difficult, because a single bitcoin's worth can fluxuate several times during any given day.

The current worth sits at about $580, but was between $550 and $600 over the previous week.