IRS Backs Off Fortnite Gaming Currency As Reportable Incomeby PYMNTS
A section of the IRS website telling people that the online currency from the popular game Fortnite was subject to federal taxes has been removed as of Wednesday (Feb.12).
The website for months, cached back to at least October according to digital references, had a section informing users of Fortnite that the digital in-game money they earned could be taxable under U.S. law, according to CNN. It apparently marked the first time that video game currencies had received a comment from the IRS.
Fortnite’s V-bucks are purchased with real money. The IRS website seemed to indicate that it would treat V-bucks like it does bitcoin and other cryptocurrencies, and looked like it could have affected millions of gamers.
The deletion was sudden on Wednesday, as all mentions of V-bucks were scrubbed and erased from the site. Experts say V-bucks, as well as other, similar game currencies, are a new field that will need to be reported in some way on one’s taxes.
IRS Chief Counsel Michael Desmond said that the video game currency inclusion on the IRS site had been a mistake. He said it had been corrected quickly once the IRS became aware of it. But Desmond reportedly had no answers Thursday as to the question of how to treat video game currencies on one’s taxes. Experts say the question has become confusing.
Jerry Brito, executive director at the Coin Center, a virtual currency think tank, said the definition of virtual currency under IRS guidance would still include V-bucks and other similar game-based money. He said that the IRS didn’t seem to have realized the consequences of what it had described as a mistake.
The IRS has stated that virtual currencies are treated as property for the purposes of people’s taxes. When Americans buy something like bitcoin, they need to keep track of how much they paid for it, and when they sell, they need to keep a record of the appreciation in value and pay taxes on capital gains.
Video games, long thought of as escapist fun, have had encroachments in the real world as the digital world has deepened and become more connected. Experts warn of fraud happening through video game marketplaces. In one instance, game developer Valve Corp halted the trade of its “container keys,” which were being sold for real money by fraudsters.