Axley & Rode, LLP

As virtual currencies like bitcoin grow in popularity, how can the IRS ensure that people are paying the related taxes? Taxpayers must report and pay taxes on income from virtual currency transactions. But according to a recent report by the Government Accountability Office (GAO), the IRS guidance for proper reporting of this income is unclear. The IRS has led campaigns to answer questions on virtual currency income compliance. Still, a lack of clarity remains, leading the GAO to conclude that “many virtual currency transactions likely go unreported to the IRS on information returns.” To learn the steps that the GAO recommends to improve reporting, read the report:  https://bit.ly/39MZsG7  

The IRS has removed two “in-game” virtual currencies, Roblox and V-bucks, from its list of examples of convertible virtual currencies. “Virtual” currency is a digital representation of value, other than real currency, that functions as a unit of account. “Convertible” virtual currency has an equivalent value in real currency. Roblox and V-bucks are “currencies” only in the sense they’re used in the online games Roblox and Fortnite. The IRS Chief Counsel said that it had been a mistake to list those in-game currencies as examples of convertible virtual currencies. It also said that transactions in those currencies don’t need to be reported on a taxpayer’s tax return.