Fortnite V-Bucks mentions on an official government website prompted in-game currency tax fears, but the IRS has decided not to tax virtual currencies – for now. Since virtual currencies like V-Bucks and Roblox Robux have actual cash value, the IRS had decided it wants a piece of the action – especially from those who receive said virtual currencies as part of their jobs. Its website recently spurred controversy when the taxman said it wanted a piece of every V-Buck purchased.
Until recently, the IRS had a curious message on its website related to virtual currency. The wording on the site said that Fortnite’s V-Bucks and Roblox’s Robux may be subject to “tax consequences.” These examples were cited alongside Bitcoin and Ether as “Convertible virtual currency” because they can be traded between users and “exchanged into U.S. dollars.”
CNN reports that the IRS quietly deleted the language, with IRSChief Counsel Michael Desmond telling reporters that the addition of the virtual gaming currencies alongside Bitcoin was a mistake. Perhaps the IRS realized that there is no official way to convert most currencies like V-Bucks back into cash. Though V-Bucks are sometimes used to launder money on the Dark Web, most people use them to purchase new cosmetic items.
Desmond initially refused to clarify whether virtual game currencies would need to be reported. Still, the IRS later explained that virtual currencies that do not leave the game environment would not need to be included on tax returns. Robux, however, can be converted back into cash, so the IRS may still want to get a piece of that action. Despite the removal from the website, the 2019 IRS tax form 1040 asks, “At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” Taxpayers will need to answer “yes” if they received any virtual currencies for free, have sold any, or have traded any for goods or services – even other virtual currency.
At this point, nearly every major game utilizes some form of virtual currency. Though the IRS removed the language that included gaming currencies (for now), it’s clear that it has realized the amount of money that can be leached from gamers if it moves forward with reporting requirements for purchased in-game currencies. Most gaming currencies function like gift cards: the currency is bought, and then can be used to buy in-game items. If the IRS moves forward with something like this, it would be like taxing a person’s income and then taxing them again for buying a gift card. That this language was on the IRS website at all was reckless, and more than a little bit ridiculous. Still, it does act as a sign that gamers, especially streamers who accumulate large amounts of virtual currencies, have a lot to worry about if the IRS decides to tax in-game money.