IRS Clarifies Virtual Currency Definitions: Game Currencies No Longer Included

Big News from the IRS

The Internal Revenue Service (IRS) has stirred quite a pot by updating its website to exclude game currencies like Fortnite’s V-Bucks and Roblox’s Robux from the league of convertible virtual currencies. This bold move was highlighted by Bloomberg Tax on February 13, raising eyebrows and provoking conversations among gamers and tax professionals alike.

What’s the Big Deal?

You might be wondering, what’s the drama? Well, the IRS has imposed a new tax filing requirement where taxpayers must declare if they’ve engaged with virtual currencies. Initially, the IRS had set the stage by citing popular game currencies as examples, but now they’ve backpedaled dramatically. Looks like V-Bucks left the tax party!

Examining the Examples

The IRS initially suggested that virtual currency must have the ability to “operate like ‘real’ currency,” meaning it should be easily transferable and exchangeable for fiat money. But Epic Games has clearly stated, “V-Bucks cannot ‘be digitally traded between users’.” So whether you use V-Bucks to build a crazy fortress or just stand there looking cool, the IRS doesn’t see them as cryptocurrency. Roblox also chimed in, pointing out that while Robux can be converted under some circumstances, it’s not a straightforward exchange.

Heavier Regulations on Crypto

In recent years, the IRS has unleashed an ambitious effort to combat tax evasion linked to cryptocurrencies. For those brave enough to tackle IRS Form 1040, you’ll spot the new question: “At any time during 2019, did you engage with virtual currency?” Failing to report can lead to fines soaring up to $250,000. Talk about a spooky consequence!

A Global Perspective on Crypto Taxation

Taxation on cryptocurrencies is a complex maze, with countries worldwide adopting wildly different approaches. Some, like France, put on the happy face and don’t tax crypto-to-crypto exchanges. Meanwhile, Congress has recently introduced a new bill that might ease the burden by proposing exemptions for low-value crypto transactions on tax filings. We can only hope they don’t throw gamers back into the tax spotlight!