Paul L. Caron

Saturday, February 29, 2020

IRS Quietly Deletes Guideline That Fortnite Virtual Currency Must Be Reported on Tax Returns

CNN Business, IRS Quietly Deletes Guideline That Fortnite Virtual Currency Must Be Reported on Tax Returns:

Fortnite 2For months leading up to this tax season, a section of the IRS's website advised players of Fortnite, the popular online video game, that their use of in-game virtual currency could be subject to federal taxes.

The little-noticed provision, which dated back at least to October according to the cached version of an IRS webpage on, appeared to mark the first time the agency has ruled on video game currencies, including Fortnite's V-bucks, purchased with real dollars. By applying the same policy to in-game money that it enforces on bitcoin, ether and other cryptocurrencies, the IRS guide seemed poised to affect millions of gamers — or their parents.

But on Wednesday, the IRS scrubbed all mentions of the in-game currency from the webpage after questions from CNN and other outlets about the policy.

Despite the sudden deletion, experts believe that transactions involving video game currencies will still need to be reported under a new question the IRS is including this year on tax forms.

Schedule 1

Just because the IRS deleted the language, they said, does not resolve questions about how the IRS plans to treat video game currencies.

The day after the agency deleted the guideline, IRS Chief Counsel Michael Desmond told reporters at a Washington conference that including the video game currencies had been a mistake, the agency confirmed to CNN on Thursday. Desmond's remarks were first reported by Bloomberg.

On Friday, the IRS finally released a formal statement: "The IRS recognizes that the language on our page potentially caused concern for some taxpayers. We have changed the language in order to lessen any confusion. Transacting in virtual currencies as part of a game that do not leave the game environment (virtual currencies that are not convertible) would not require a taxpayer to indicate this on their tax return." ...

The reversal came the same day that the Government Accountability Office published a report calling on the IRS to provide "clarified guidance" on virtual currencies.

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