IRS Updates “Virtual Currency” Definition, Keeps BTC But Removes Roblox, Fortnite V-bucks
The Internal revenue System (IRS) pulled the definition of “Virtual Currency” from its website that characterized gaming currencies used in Fortnite and Roblox as convertible virtual currency and would have subjected millions of US users to answer Question 1 on the 2019 1040 form.
The recently revised attachment to Form 1040 now asks taxpayers to answer in yes or no to a question on whether or not they received, exchanged, sold or otherwise acquired a financial interest in any virtual currency in 2019. Jerry Brito, executive editor at the crypto advocacy group Coin Center first took notice of it yesterday.
While defining the term on its website, IRS provided examples of the virtual currency stating, “Bitcoin, Ether, Roblox, and V-bucks are a few examples of a convertible virtual currency.”
A video game, Roblox allows users to design their own games and allow them to earn or purchase “Robux ” to buy special abilities or avatar upgrades. “V Bucks” is an in-game currency of popular Fortnite game.
In that case, taxpayers would have to answer “yes” to Question 1 if they received any V-bucks or any other in-game currency last year.
IRS however made some changes or more correctly pulled out some words from the definition after Bloomberg reached out to them. In the first paragraph, it now covers only blockchain as a distributed ledger removing DAG and Tempo from examples.
As for virtual currency, it illustrates only Bitcoin, “Bitcoin is one example of a convertible virtual currency. Bitcoin can be digitally traded between users and can be purchased for, or exchanged into, U.S. dollars, Euros, and other real or virtual currencies,” reads the updated definition.
Before pulling out the V-bucks, Roblox, and for some reason Ether, Brito notes it would have resulted in “tens of millions of American taxpayers,” with Fortnite having about 250 million users, of course non-US as well, to check yes on the new 1040 question.
While V-Bucks can't be traded between users or exchanged into other currencies, Robux can be earned and exchanged by developers for real currency for which they have an IRS form on file with Roblox.
“Game economies are typically closed economies where currencies cannot be cashed out or traded,” said the Entertainment Software Association.
The “definition of virtual currency in IRS guidance would still encompass these (Ether, V-Bucks, Robux). I don’t think they realized the consequences of their 1040 question,” said Brito.