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.
Fortnite Token Owners Don’t Have to Pay Crypto Tax
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.
Gray Areas Still Persist in IRS Digital Currency Tax Guidelines
In a related development, the U.S. Government Accountability Office (GAO) declared that the IRS wasn’t doing enough to clarify crypto tax laws.