Gamers who transact in virtual currencies as part of a video game do not have to report the transactions on a tax return if the currencies do not leave the game environment, the IRS made clear in a statement released on its website Feb. 14.
The clarification relates to whether, or when, a currency used in a video game should be considered “convertible,” meaning able to be converted into real currency. The Service’s current guidance on virtual currencies applies only to currencies that are convertible, a typical example being bitcoin.
The clarification came two days after the IRS made an unannounced deletion of language from its website about video game currencies.
The Feb. 14 statement reads in full: