Fortnite Millionaire? The IRS Is Onto You
Tax day is here for gamers.
If you sell something and make money off that sale, you can be taxed for it. It’s a fairly obvious observation but one that can be forgotten in the convoluted age of meme coins and digital marketplaces. A new tax form coming for 2025 tax season offers a bit of clarity to the profitable world of virtual dollars, crypto currencies, stablecoins, and NFTs: The 1099-DA (for “Digital Asset”) is coming to help keep track of the money made from all of the above. But don’t wait for it — you’re on the hook now for, let’s say, nontraditional profits you make, whether in crypto, Roblox, or, well, anywhere.
In other words, the 1099-DA form does not mean there’s a change in tax code. Nor does it mean you’re going to get away with tax-free gains from virtual assets in 2024. And despite everyone’s tendency to lump anything digital with the nearly $300 billion-dollar gaming industry, no, this is not the beginning of a “Roblox tax.” Most of the time gaming marketplaces happily remain tax-free oases. But some of the time, you could be on the hook.
The Roblox Tax
In Q2 of 2024 alone, Roblox generated over $955.2 million in bookings — money that didn’t just go to the company’s bottom line. Plenty of developers charge Robux to play games they made on the platform. They may charge more for in-game purchases, and not all of them use all of that money in the Roblox marketplace.
Virtual currency that remains in their virtual state are not taxable. A Robuck is a Robuck — a currency overseen by a private company and out of the reach of the IRS. This goes for most virtual currencies: V-Bucks on Fortnite, ISK on Eve Online, Minecoins on Minecraft, The Linden Dollar on Second Life . You can accrue as many of these as you want without ever receiving any attention from the IRS. But the second you try to make your marketplace hustle into something that turns a dollar in the real world — the tax man will pounce.
A Robuck is a Robuck — a currency overseen by a private company and out of the reach of the IRS. This goes for all virtual currencies: V-Bucks on Fortnite, ISK on Eve Online, Minecoins on Minecraft, The Linden Dollar on Second Life — you can accrue as many of these as you want without ever receiving any attention at all from the IRS. But the second you try to make your marketplace hustle into something that turns a dollar in the real world — the tax man will pounce.
“There are a lot of ways to monetize gaming activities,” notes Alison Flores, a manager for H&R Block. “Streaming videos, hosting servers, advertising dollars, selling merch.” And if you’re doing any of this and accruing real U.S. dollars, “you might be … considered a small business because you’re successful at monetizing something.” As such, you’ll report income and expenses and are responsible for tracking sources and keep a record of expenses.
What Gamers Need To Know About The 1099-DA
“Starting the first of January, 2025, the 1099-DA is a new form that is indirectly connected with gaming,” Flores says. “What the 1099-DA actually tracks is crypto and non-fungible tokens (NFTs). If you sell something in Roblox, it looks like an NFT, but it’s not likely to fall in that category because in that game environment, you’re not building on a block chain. It’s not going to be reported that way.” In other words, if the currency stays in the game, it’s not real money, at least as far as the IRS is concerned. Once it leaves the game though — going through an exchange to turn Robux into U.S. dollars — you will find that taxable income under a different form.
“What you will see is different docs like 1099-NEC (Non-Employee Compensation) or a 1099-MISC (Miscellaneous) which is often for prize winning.” These will show you the taxable money that you made in the exchange, something that Flores emphasizes you should be keeping track of anyway — especially if your game marketplace sales bring in substantial income.
Another form that may be coming your way in such a situation is the 1099-K. This form doesn’t actually report income in the same way that some other 1099s do, but keeps track of the flow of income through payment processors — Paypal, Venmo, Square, or online marketplaces. While the 1099-K reports the flow of money, it doesn’t count toward your taxes. Instead, look to your records of income in addition to 1099s like the MISC or NEC for the actual taxable dollars and, says Flores, make sure you don’t double count your income in situations where a 1099-K was issued.
Where do you get these forms? “Most platforms deliver tax forms electronically,” Flores says. So go to your app (whether Venmo or the Dev Exchange) and you will need to navigate to the tax or revenue section in the application.
Tax Season Begins
The 1099 forms will all be available, well, today, January 31, which is the deadline for finance departments everywhere to send out all the important tax forms, from the standard W-2s (for employees) to a rainbow of 1099s (for everyone else making money from a business).
For those of us who have made money outside of everyday employment, it’s a good day to go fishing, getting forms in order and making sure to have a good sense of what you’re going to owe the government.
This is a day to “get records together and make an appointment,” Flores says. “Do it right away especially if you have income that make you self-employed.” Maybe your Roblox town square game is taking off. If you’ve created the next Brookhaven, you might be about to make bank — and the government is watching.
