IRS quietly deletes guideline that Fortnite virtual currency must be reported on tax returns

[Mr Nobody]

https://www.cnn.com/2020/02/13/tech/fortnite-taxes/index.html

 

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The little-noticed provision, which dated back at least to October according to the cached version of an IRS webpage on Archive.org, appeared to mark the first time the agency has ruled on video game currencies, including Fortnite's V-bucks, purchased with real dollars. By applying the same policy to in-game money that it enforces on bitcoin, ether and other cryptocurrencies, the IRS guide seemed poised to affect millions of gamers — or their parents.

Quote

Despite the sudden deletion, experts believe that transactions involving video game currencies will still need to be reported under a new question the IRS is including this year on tax forms. Just because the IRS deleted the language, they said, does not resolve questions about how the IRS plans to treat video game currencies.

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Taxpayers who had virtual currency transactions in 2019 will need to fill out Schedule 1 with their Form 1040, according to the IRS's 1040 instructions. The first question on Schedule 1: "At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?"

Apparently I need to hire an accountant to keep track of my gaming.

 

I wonder if it is a matter of time before the IRS tries taxing the virtual currency that you earn in game, as opposed to just the virtual currency you buy in game. When that happens, I have a few questions:

 

1. Am I considered self-employed when I am earning virtual currency?

2. Do I have to pay sales tax on items I purchase in game?

3. If the virtual currency that I earn is as the result of criminal activities (like in GTA), does this open me up to prosecution for virtual crime?

[ARikozuM]

Oh, no... the government isn't bringing in enough revenue after massive tax cuts, layoffs, and the exodus of 7 large companies... 

 

whodathunk?!

 

Also, fuck this. I ain't reporting what I have in microtransactions! Fuck that. Ask Bezos to stop hiding billions overseas. 

[Syaoran]

New job position: Gaming Accountant

[GreatnessRD]

This is getting stupid! Government gonna cool out with this garbage.

[PlayStation 2]

Why did the IRS even have any tax guidelines for things that aren't real money in games? It's stupid.

[Mr Nobody]

23 minutes ago, handymanshandle said:

Why did the IRS even have any tax guidelines for things that aren't real money in games? It's stupid.

If I had to wager a guess, it's because they consider in-game currency and items to be commodities that can be purchased with real dollars, and therefore are subject to taxation. I agree that it's stupid, but then again I think all taxation is stupid.

 

[Kisai]

On 2/14/2020 at 3:26 PM, Mr Nobody said:

https://www.cnn.com/2020/02/13/tech/fortnite-taxes/index.html

 

Apparently I need to hire an accountant to keep track of my gaming.

 

I wonder if it is a matter of time before the IRS tries taxing the virtual currency that you earn in game, as opposed to just the virtual currency you buy in game. When that happens, I have a few questions:

 

1. Am I considered self-employed when I am earning virtual currency?

2. Do I have to pay sales tax on items I purchase in game?

3. If the virtual currency that I earn is as the result of criminal activities (like in GTA), does this open me up to prosecution for virtual crime?

 

I think the problem is there is no way to "cash out" legally, so to claim any income from virtual currency in a game, there must be a way to cash it out otherwise they would be requiring the players to violate the game's terms of service, thus committing fraud in the process.

 

Like, the entire reason virtual currencies exist is so the game developer doesn't have to pay taxes or further transaction fees on the virtual currency. But there are also services like Twitch, Mixer, Youtube and adult services like CB that let you "tip" the person streaming, and that is certainly taxable income.

 

Perhaps they saw Mr.Beast tipping people $10,000 and wanted some of that.

[greenmax]

On 2/14/2020 at 4:26 PM, Mr Nobody said:

IRS

Well you dont want to fuck around with the taxman.

You gotta do what you gotta do, if its ingame currency, tips, casino winnings (USA only), bottle depot monies, working for cash, getting paid for products in cash.

[Donut417]

36 minutes ago, greenmax said:

tips

That’s why I prefer tipping in cash. A lot harder for the tax man to track hard currency. 
 

On 2/15/2020 at 2:00 PM, Mr Nobody said:

commodities that can be purchased with real dollars, a

But the US Federal government doesn’t tax goods, with the exception of fuel. Use tax is collected by state governments which is called sales tax. If the IRS does start taxing this currency as income. How long before states start taxing virtual goods with sales tax? 

[greenmax]

Banks hate crypto currency

Banks have influence on paid off politicians

[descendency]

On 2/15/2020 at 2:00 PM, Mr Nobody said:

If I had to wager a guess, it's because they consider in-game currency and items to be commodities that can be purchased with real dollars, and therefore are subject to taxation. I agree that it's stupid, but then again I think all taxation is stupid.

 

Not only is it purchasable with real world money, but it is also tradeable (not sure about fortnite, but other games...). All around, this is just the IRS trying to not get caught with their pants down like they did with cryptocurrencies.

[BuckGup]

On 2/15/2020 at 12:40 PM, handymanshandle said:

Why did the IRS even have any tax guidelines for things that aren't real money in games? It's stupid.

Because I could launder a shit load of money through games and have it tax free. Well I mean already that's why Bitcoin is nice

[Silverdogz]

I'm not sure why anyone is surprised. The IRS got caught with their pants down with crypto and is hurrying to catchup with the digital markets. What makes it taxable I think is because it's "tender" between players of the game. So the IRS will happily tax that and then come after you for tax evasion if you don't pay up and they figure it out.

[Belgarathian]

On 2/15/2020 at 12:26 PM, Mr Nobody said:

https://www.cnn.com/2020/02/13/tech/fortnite-taxes/index.html

 

Apparently I need to hire an accountant to keep track of my gaming.

 

I wonder if it is a matter of time before the IRS tries taxing the virtual currency that you earn in game, as opposed to just the virtual currency you buy in game. When that happens, I have a few questions:

 

1. Am I considered self-employed when I am earning virtual currency?

2. Do I have to pay sales tax on items I purchase in game?

3. If the virtual currency that I earn is as the result of criminal activities (like in GTA), does this open me up to prosecution for virtual crime?

Hilariously wouldn't that mean that literally everyone could deduct expenses not limited to their PC, such as office rent, phone, power, water, etc, etc. 

 

This would probably work out as a negative for the IRS.

[Donut417]

14 minutes ago, Belgarathian said:

This would probably work out as a negative for the IRS.

No. Because you would have to prove all of those deductions. The more deducations you have the higher chance of an audit. Aduits are pretty painful from what I have read. They will litterially go over your entire financial history. But be sure you wrote the stuff off correctly. The IRS is probably one of the most feared parts of the US government. They DO NOT require court authrotization to take your assets. If they feel you owe money, they can just take it. 

[Belgarathian]

If you earn't even $1 of virtually currency you have the right to deduct from your income the costs of earning that $1. 

 

Yes... Keep your receipts, that's how you usually do it... The rest of it is making sure that you've reported everything correctly and haven't been shady about your tax returns. 

 

My statement is that the tax revenue from virtual currency is likely to be less than the deductions it would open them up to.

[Kisai]

15 hours ago, Donut417 said:

No. Because you would have to prove all of those deductions. The more deducations you have the higher chance of an audit. Aduits are pretty painful from what I have read. They will litterially go over your entire financial history. But be sure you wrote the stuff off correctly. The IRS is probably one of the most feared parts of the US government. They DO NOT require court authrotization to take your assets. If they feel you owe money, they can just take it. 

Unfortunately that's literately the problem with most countries tax systems, is that they are an entire bureaucracy that is unaccountable, just to ensure accountants are doing their jobs.

 

Like the government already knows what you're being paid, either your job doing it's accounting, or your own bank cashing/depositing payments, there has never been any need to "do taxes" the way people do taxes since the late 90's. Move all the income taxes and fold them into property ownership, and then it matters, because you can't avoid paying it, and services are appropriately funded for an area. Sure putting all the burden of taxes on the business/property owners seems unequal, but that's where it belongs. Write-offs exist for businesses to reduce their income tax burden, but they shouldn't be able to reduce their tax burden to below the level of services needed for their property.

 

Video game virtual currencies are already used for money laundering, just the beneficiaries of that money laundering are typically criminal gangs outside the US.

[Mr Nobody]

16 hours ago, Belgarathian said:

If you earn't even $1 of virtually currency you have the right to deduct from your income the costs of earning that $1. 

 

Yes... Keep your receipts, that's how you usually do it... The rest of it is making sure that you've reported everything correctly and haven't been shady about your tax returns. 

 

My statement is that the tax revenue from virtual currency is likely to be less than the deductions it would open them up to.

What costs of earning virtual currency do you think you're going to be able to deduct?

[SpaceGhostC2C]

On 2/15/2020 at 12:26 AM, Mr Nobody said:

Apparently I need to hire an accountant to keep track of my gaming gambling.

FTFY

 

On 2/15/2020 at 7:40 PM, handymanshandle said:

Why did the IRS even have any tax guidelines for things that aren't real money in games? 

Houses and stocks, for instance, aren't "real money" (nor "fake money" for that matter) either. Not that it makes them any less taxable.

 

On 2/17/2020 at 7:20 AM, Kisai said:

 

I think the problem is there is no way to "cash out" legally, so to claim any income from virtual currency in a game, there must be a way to cash it out

I think you are mistaking cash and income.

 

[Mr Nobody]

1 hour ago, SpaceGhostC2C said:

FTFY

 

 

 

I don't see how grinding out tasks in a game to earn $ is "gambling". Can you elaborate?

[Sauron]

On 2/15/2020 at 12:26 AM, Mr Nobody said:

1. Am I considered self-employed when I am earning virtual currency?

I would assume the amount of V-Bucks that you can realistically earn without paying real money would be below the minimum threshold for them to count as taxable income, but I could be wrong.

On 2/15/2020 at 12:26 AM, Mr Nobody said:

3. If the virtual currency that I earn is as the result of criminal activities (like in GTA), does this open me up to prosecution for virtual crime?

Well... it's not illegal to steal from NPCs in a videogame, they aren't people.

[Mr Nobody]

16 minutes ago, Sauron said:

Well... it's not illegal to steal from NPCs in a videogame, they aren't people.

Give the Supreme Court time....

 

Quote

I would assume the amount of V-Bucks that you can realistically earn without paying real money would be below the minimum threshold for them to count as taxable income, but I could be wrong.

$400 is the minimum threshold. Considering Rockstar sells an $8,000,000 GTA Shark Card for $99 and my earnings in game are about $10,000,000 per week if I'm really grinding, I think that threshold is easily reached.

[Belgarathian]

2 hours ago, Mr Nobody said:

What costs of earning virtual currency do you think you're going to be able to deduct?

Like any normal business, anything that you had to spend to run the business:

• Office space
• Computer gear
• Internet
• Phone
• Power
• Water 
• Vehicles
• Travel to tech or gaming related conferences
• Office supplies
• Cleaning
• etc
• etc

[RonnieOP]

4 hours ago, Kisai said:

Like the government already knows what you're being paid, either your job doing it's accounting, or your own bank cashing/depositing payments, there has never been any need to "do taxes" the way people do taxes since the late 90's. 

They know how much you get paid but thats it. And that doesnt mean a whole lot. And then you have people who are independant contractors or self employed that may not use a bank or get paid via check.

 

When you start a job you fill out the paper work for your taxes. You can put whatever you want on it. You could be a single person with no kids/family and claim 10 dependants so that they take less out of each check. When you do your taxes at the end of the year and dont have 10 dependants they are going to take that money back 

 

And then even non business owning individuals have alot of tax deductions they can claim.

 

I get to claim any miles drove for work. Any payments for a garage or parking, any meals, etc.

 

Hell last year i bought a couple knives that cost me $600 and i get to claim them and use them as a deduction.

 

Then you have deductions for first homeowners, switching to solar, etc.

 

So theres still plenty of legit reasons as to why we still need to do taxes.

 

 

I dont know enough about vbucks and the like to make a real statement about this though. Ive bought roblox currency for my kids but thats it.

[Mr Nobody]

1 hour ago, Belgarathian said:

Like any normal business, anything that you had to spend to run the business:

• Office space
• Computer gear
• Internet
• Phone
• Power
• Water 
• Vehicles
• Travel to tech or gaming related conferences
• Office supplies
• Cleaning
• etc
• etc

Most of these things you would only be able to deduct the percentage of time you are actually earning virtual money (which will significantly reduce the amount you would be able to claim), and it has the added benefit of red flagging you for an audit. But with the changes in tax law in 2018, the likelihood is that for the average gamer, none of these things are deductible, as they will not exceed the standard deduction currently in place.