A change to the IRS website suggests that game currencies are not taxable, despite an earlier statement that they are – but tax experts say people should probably still declare them …
The Verge reports on the odd situation.
On Wednesday, the IRS quietly changed a provision on its website that said transactions of virtual currency like Fortnite’s V-bucks were taxable and may have to be reported on tax returns, as reported by CNN.
The provision had been on the IRS’ website since at least October, and you can see it right here, thanks to the Wayback Machine. On the archived version of the site, Bitcoin, Ether, Roblox (likely referring to Robux from the game Roblox), and V-bucks are listed as specific examples of a “convertible virtual currency.” The IRS defines a convertible virtual currency as one that has an equivalent value to or acts as a substitute for real currency. The IRS’ website now only lists Bitcoin as an example of a convertible virtual currency.
However, the IRS’ inclusion of video game currencies was apparently a mistake. IRS chief counsel Michael Desmond told reporters today that the issue was “corrected and that was done quickly—as soon as it was brought to our attention,” according to Bloomberg Tax.
However, when Bloomberg specifically queried the position, Desmond refused to be drawn.
I asked: “So if people have gaming currency they don’t need to check ‘yes’ on the 1040?”
He said: “I am not even looking into that…I’m not saying one way or another. I think I’d be getting ahead of myself if I said anything. Read the website. We posted a correction yesterday.”
Tax experts say the safest thing is to pretend the IRS never deleted the text.
I still haven’t gotten a positive answer from the IRS on the status of game currencies. So tax experts are telling me that until they’re explicitly exempted, you should probably behave as if the IRS never deleted the langauge.
That is, you should treat V-bucks like bitcoin.
— Brian Fung (@b_fung) February 13, 2020
Just because the IRS deleted the reference, they say, doesn’t mean game currencies are not taxable.