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Calling Fortnite Cash a Virtual Currency Was an IRS Error

Feb. 13, 2020, 7:26 PM

The IRS quickly recognized the need to correct website language that appeared to signal Fortnite and Roblox players were subject to a new disclosure requirement aimed at virtual currency transactions, the agency’s top lawyer said.

The agency on Wednesday removed language identifying Roblox and V-bucks—Fortnite’s in-game currency—as examples of convertible virtual currency. The language was removed hours after Bloomberg Tax asked if gamers who purchased or earned in-game currencies would have to disclose that on their 2019 tax returns.

IRS Chief Counsel Michael Desmond indicated that the inclusion of the video game currencies was a mistake, though he offered no insight on how they ended up alongside Bitcoin on the list of examples.

“It was corrected and that was done quickly—as soon as it was brought to our attention,” Desmond told reporters Thursday at a Tax Council Policy Institute conference in Washington.

The IRS has been focused on curbing cryptocurrency tax evasion. Last fall the agency released an updated Form 1040, which is used to report income, that for the first time asked taxpayers if they had received, sold, exchanged, or otherwise acquired a financial interest in a virtual currency.

Fortnite and Roblox, like many other online video games, allow players to earn or purchase in-game currencies that are used to customize and upgrade their characters.

Jerry Brito, executive director of the advocacy group Coin Center, said Wednesday that labeling in-game currencies as convertible virtual currency could unknowingly subject millions of people to new IRS reporting requirements based on the agency’s website. Even though the IRS pulled the language from the website, Brito said he is unsure whether that means people with in-game currency are in the clear.

Desmond demurred when asked to confirm that gamers wouldn’t need to mark ‘yes’ to the new 1040 question, but said addressing gaming currencies in the virtual currency context isn’t a major focus for the agency right now.

“I am not even looking into that. So I’m not saying one way or another. I think I’d be getting ahead of myself if I said anything,” Desmond said. “Read the website. We posted a correction yesterday and I kind of leave it at that.”

To contact the reporter on this story: Allyson Versprille in Washington at

To contact the editors responsible for this story: Patrick Ambrosio at; Colleen Murphy at