The Inland Revenue Service (IRS) has shown a rare episode of common sense when it comes to cryptocurrencies and decided not to tax earnings on V-bucks, the digital currency in the game Fortnite. Some five months after warnings appeared on the Fortnite web page advising users of the implication of buying V-bucks, the IRS has quietly removed all mentions of in-game currencies from its own web page on the matter, suggesting they have seen sense.
Fortnite Players Relieved
A cached web page from the IRS dating back to at least October last year shows that the agency had planned to lump V-bucks, which can be purchased with real dollars, in with the likes of Bitcoin, meaning that all transactions would require reporting to the IRS at the end of the tax year:
Virtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency, is referred to as “convertible” virtual currency. Bitcoin, Ether, Roblox, and V-bucks are a few examples of a convertible virtual currency.
Now however the agency has removed all mentions of V-bucks from its advisory page, suggesting that it no longer considers in-game currencies to be in the same bracket. This will relieve the millions of Fortnite players around the world (or more likely their parents) who no longer have to go through the hell of tracking and calculating each purchase and sale.
IRS Chief Admits Error
IRS Chief Counsel Michael Desmond admitted to reporters at a tax policy event the following day that labelling V-bucks as a virtual currency was an error:
It was corrected and that was done quickly—as soon as it was brought to our attention.
While this is a welcome move, it illustrates how difficult the IRS is finding it to grapple with taxing cryptocurrencies effectively. This has been borne out by the aggressive way in which they have gone about chasing those they feel have underpaid their taxes on cryptocurrencies, which Node40 Balance co-founder Sean Ryan called “very offensive” and “very scary”.