The U.S. Internal Revenue Service (IRS) has updated its webpage, removing parts of its crypto tax disclosure guideline which classified game tokens as cryptocurrencies. This includes the online gaming sensation, Fortnite.
According to BloombergTax, game token owners won’t have to answer the crypto-specific question on Form 1040. This development comes after the IRS pulled confusing language from its definition of virtual currency.
As recently as Wednesday (February 12, 2019), the IRS lumped game tokens like Roblox and V-bucks under the virtual currency umbrella. Based on the initial wording of the IRS’ virtual currency definition, millions of game token owners in the U.S. would have been obligated to check yes on the crypto question in Form 1040.
Game tokens typically operate within “closed” digital economies where there is hardly exchange of these digital ‘coins’ for fiat currency. The typical function of game tokens in for making in-game purchases for virtual assets needed to level-up in games like Fortnite, Roblox, etc.
Sometimes, game developers can cash out their tokens for U.S. dollars but game companies already file such transactions under Form 1099. Commenting on the matter, the Entertainment Software Association issued a statement, declaring:
Financial regulators who have considered the status of game currencies in detail have treated them distinctly different from Bitcoin and similar virtual currencies precisely because they cannot be cashed out. We think that is the appropriate approach and are hopeful that on closer consideration the IRS will correct its guidance.
In a related development, the U.S. Government Accountability Office (GAO) declared that the IRS wasn’t doing enough to clarify crypto tax laws. The Congressional watchdog highlighted the absence of clear-cut details on how the Foreign Account Tax Compliance Act (FATCA) applies to crypto tax reporting.
An excerpt from the GAO report reads:
Part of the 2019 guidance is not authoritative because it was not published in the Internal Revenue Bulletin (IRB). IRS has stated that only guidance published in the IRB is IRS’s authoritative interpretation of the law. IRS did not make clear to taxpayers that this part of the guidance is not authoritative and is subject to change.
As previously reported by Bitcoinist, the IRS has put crypto and the gig economy as major focus areas for the 2020 tax season. Some U.S. lawmakers and blockchain advocacy groups are also clamoring for the establishment of a de minimis exemption for crypto tax reporting below a certain price threshold.
Should Fortnite and other game token owners pay crypto taxes? Let us know in the comments below.
Images via Shutterstock
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