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IRS goes back to the question of whether video game currencies are taxable

On Wednesday, the IRS quietly changed a provision on its website that said virtual currency transactions such as Fortnite’s V-dollar was taxable and may need to be stated on tax returns, as reported by CNN.

The provision has been on the IRS website since October and you can see it here, thanks to the Wayback machine. On the archived version of the site, Bitcoin, Ether, Roblox (probably referring to Robux of the game roblox) and V-dollar are mentioned as specific examples of a ‘convertible virtual currency’. The IRS defines a convertible virtual currency as a currency that has an equivalent value to or acts as a substitute for real currency. The website of the IRS now only lists Bitcoin as an example of a convertible virtual currency.

However, the recording of video game currencies by the IRS was apparently a mistake. IRS Chief counsel Michael Desmond told reporters today that the problem was “resolved and that was done quickly – once it was brought to our attention,” according to Bloomberg Tax. And Desmond was apparently emphatic that there was nothing else to read in it, according to the author of Bloomberg Taxes story, Ally Versprille, who questioned Desmond today:

But despite Desmond’s comments and despite the fact that video game currencies have been removed from the websites of the IRS, the IRS has not explicitly has exempted them from reporting. That could mean that you still have to report them, according to tax experts spoke to Brian Fung, the author of the CNN article about the situation:

Jerry Brito, executive director of the non-profit cryptocurrency research firm Coincenter, shared one interpretation of current policy yesterday in a Twitter thread:

So until the IRS further clarifies its policy, it remains unclear how you should treat video game currencies on your taxes.