Virtual Currency Declaration for Game Currency

Technical topics regarding tax preparation.
#1
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So the 2019 1040 has a declaration at the top of Schedule 1, requesting to know whether you have "At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?"

The IRS' Virtual Currency guide at https://www.irs.gov/businesses/small-bu ... currencies gives examples that include not just Bitcoin, but also Roblox or V-Bucks.

V-Bucks are a virtual currency in the game Fortnite. You buy the in-game currency to purchase cosmetic items for your character or buy the game's Battle Pass. Roblox has a similar currency used to buy games or cosmetic items.

Are we expected to check the box yes for these in-game currencies? Anyone with kids very likely bought some of this in 2019 given the popularity of Fortnite, Roblox, or any of the many games that use their own similar virtual coins.

Thanks!!
 

#2
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Good catch...

It looks like there is a healthy secondary market for auctioning off V-Bucks...based on a quick Google search.
 

#3
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I'm still so torn on this. If you do check the box, does that mean there's now a requirement to list the transactions for the use of the virtual currency on 8949? There's no gain or loss since most of these in-game currencies don't fluctuate, but that's going to be a huge pain to ask a client to go through their payment histories to track all of these games that use such currency.

I looked at what I bought my kids last year, and found that we bought in-game virtual currency for Roblox, Fortnite, NBA2k20, & MLB The Show. I know Madden and many of the EA games use similar in-game coins. Even a lot of mobile games or apps might qualify as you're converting your dollars into a virtual coins or credits.

Am I overreaching or is this unintended consequences?
 

#4
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stugotzarmy wrote:Am I overreaching or is this unintended consequences?


I get a headache every time I think about it.

Everyone with kids age 5 - dependent adult probably has exposure, as you noted, even if they are not aware of it. Some younger clients even may be guilty of dabbling with the in-game currencies...

I'd like to see more guidance. Maybe even a safe harbor detailing that if you buy these tokens and use them in-game the deemed gain or loss is zero and no reporting is required.

Otherwise...right now it looks like we should be reporting these transactions on Form 8949 even if there is no gain or loss. That will be a nightmare if a 12 year old purchased lots every other day during the year and the 8949 level of detail just isn't there.

Does anyone know if these in-game currencies ever sell above basis like Bitcoin et al.? Or are they just discounted to be re-sold, kind of like gift cards? The latter would suggest they're not really a "currency".
 

#5
jon  
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There was a bill I believe from the House with a minimum of $200, but it did not make it to the floor and it was for 2020. All I am doing is requiring the box to be checked by client and that is what I will use. The IRS in the Coin Exchange operation sent out letters to a few thousand(?) they got the information on and basically said "we have information you had transactions involving virtual currency please review those transaction and you may need to amend your return"!!! Who knows you may get a letter, but ignoring the box you may get a letter -------------------
 

#6
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https://www.cnn.com/2020/02/13/tech/fortnite-taxes/index.html

Looks like the IRS updated guidance to remove gaming currency references.
 

#7
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Good catch. I can only imagine an over-stressed doctor blowing a gasket because junior incurred thousands of transactions for game tokens during the year a few dollars at a time... :)
 


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