SL and the IRS?

Hey, Fellow Avatars! Now that LL owns the money market, has it changed how you will report SL income to the IRS? (I am, OF COURSE, assuming that each and every one of you who is also a US Citizen makes a full accounting to Uncle Sam of any real-world monies earned in SL! Of course, I also assume that I can leave the doors to my house and car unlocked and it will be okay... so obviously I'm a great big Pollyanna!)

Specifically:
- Do you report transactions that happen solely in-word based on the value of the Linden at the time of the transaction? For example, you pay an in-world architect X number of L$ to build your store, and you want to write off the expense. (Assuming, of course, that you are doing the smart thing and claiming your SL time as small business activity!) What sort of receipt do you get from the contractor?

- If you pay "virtual employees" do you also issue them 1099s? Or perhaps even collect W-4s from empoyees and issues W-2s?

- Conversly, if you had in-world employment, would you be willing to give out your real life information so that the employer could issue the appropriate tax documents?

- Has anyone legally incorportated an in-world-only business?

I have a lot more questions, the answers to which will help me to work with the IRS on whether or not VERTU would need 501c-3 status to continue operations in-world. Thanks for your help!

-BHODI

Noooo! They're coming to get me!

I was wondering when someone would ask this. LOL
I would like to know how to get my receipt for a stupid "Barber Shop" video I got for L$2000 on ACCIDENT.
(Stupid enter key)

Anyway, all transactions are available on our account in the website as you probably know. But I'm assuming you understand this stuff more than I ever will.
Is it our fault that we have no way to send W2 forms to emplyees? Or that I can't get one from my emplyer? Or rather.. its just so laughable that we would try. As lots of people see's this as a game still.
I know one thing. I'm not going anywhere because its going to be fun finding out how this all plays into our real life econemy. Like when/if the IRS picks up on their radar screen all the non-reported income that people are making in these places. I can't wait to see how the general public reacts to that when it hits the media that someone got flagged for it.

I could see it keeping people away from an online activity such as this. Or raising its awarness that they do in fact exist now.
Hehe Fun fun!

Any money I make inside SL and convert out to $US dollars, I would report to the IRS. How that money is converted - whether previously through GOM or now through LL - is irrelevant to me.

As there is currently little to no practical way to deal with provincial legalities in an internationally-accessible virtual world, I'll stick with keeping inworld activities separate from the conversion to real world moneys and let inidividuals handle their own affairs appropriately.

Here's another question: if you use the Lindex, and the money just sits in your account and gets applied your monthly fee, is that even income?

I'm not an accountant, nor do I even pretend to be one. However, by generalizing from Alternative Minimum Tax (tax on capital gains made on paper even if no sale is realized) and the not-so-recent "scholarships are taxable as if you received the tuition/room/board as wages" my guess would be that the IRS would consider the time someone bought your widget as being the time of the gain.

Now here are some grains of salt (remember from a guy who has trouble calculating tips in his head). If you never convert L$ to US$ then los Federales probably have no claim on you in the same way that paying pretend $1200 for Boardwalk in Monopoly® is not a taxable event. However, using L$ to pay tier probably would bring it out of the realm of fiction and then we're back to the date of widget sale.

Matters are further complicated by there being no well established - in the IRS's eyes - conversion rate as there is for, say the Burundi Franc. As a very practical matter, one could claim bafflement should the IRS ever come calling on the matter and as they are probably as confused as we all are on this, they'd probably accept back taxes plus interest once they figured out if you do owe anything.

The Congress is working on getting their heads around this whole net thing but it is kinda hard. They've already taken some measures to codifying off-shore internet gambling, and I imagine they are looking at places like eBay that move billions of dollars from person to person and drool over lost tax revenues.

As for the 501(c)(3) status, I strongly recommend that you either file for exemption or find someone who knows what they are talking about. The only thing worse than owing taxes on some virtual good that you virtually bought is having to pay taxes on money that you collected for charity.

We're working on it. As for your status, I would make an appointment with an accountant.

You should not give these blood suckers ideals!

Maybe even Japan will start taxing SL transactions. The 5% consumption tax, soon to become 15%

I am a finance officer in RL but it is not for personnel taxes. I would assume that only REAL money gains would be taxable. Exsample, you own a island and pay 200 dollars American a month. That comes out to 2400 dollars American a year. Take back over that and the difference would be the taxable amount, any under would be a loss. Of course if you have no expenses it would all be a gain.

I have no ideal of What the American IRS would say. Probally they do not either. Talk to an tax account (if you can afford one). If you feel guilty, you should add the amount as other income and pay your tax

OMG is My Buny Tail Going To Be Taxed

Do the right thing! add another ¥100,000 to your income when you do your taxes this february. Then they will not get your tail

Just to give everyone more info. I am talking to both the Sec. of State's office (in my own state) because they are the folks who issue non-profit status AND the IRS. At this point, the question of whether or not VERTU would need non-profit status, and under what circumstances it would be awarded, is very muddy. Current practices of folks actually making money in SL would help simply help me when talking to these guys!

Thanks!

I was wonder about the taxes. I am a resident of Japan but assume the SL servers are located in the United States. Perhaps I recieved the money from a resident of Germany. Where does the transaction take place and who has jurisdiction?

I tell everone that my RL job is BORING! Now you know that it is true!

This year, I'll probably just report money that actually hits Paypal, and subsequently, my bank account.

Next year and beyond? Well, it could become a real headache if L$ starts being treated as a real currency.

...

Maybe this is what rich people do - they take their money out of US$ and put it in places where it doesn't look like income.

...

I don't think SL is going to be bothered by the IRS until they can figure out a way to tax eBay.

pay your taxes.

It's really that simple.

I consider the Internet to be a Separate nation not answerable to any other nation nor subject to the laws of the United States or any other nation.

I agree. When I start earning money off of this, there is NO way I'm going to even bother filing taxes for this. I'm taxed enough as is, a 15% sales tax on my goods sucks ass. Not to mention they also chomp a good chunk out of our paycheck for other government expenses as well as E.I.

Canada has been riddled with scandals of government spending our tax dollars willy-nilly. BILLIONS have been wasted on everything from the Sponsorship Scandal to the Human Resources Boondogle. Financially now, if anything is a grey area in terms of legalities, I am NOT putting more effort in and getting nothing in return.

Unfortunately, if your local government decides to disagree with you, then your opinion isn't worth terribly much to them...

I want this to be true also.
But if it was it's own nation we wouldn't get sued for downloading music either.
The USA is taking over another nation! We must FIGHT!
Or no, wait thats the IRAA. But still the courts favor on their side.
I don't want to turn this into the downloading music subject. But just as an example.
I hope they stay away from the L$. But just me hoping they do gives me a feeling that they will try.
I agree that ebay would get the boot first however. If things started to go that way.
Nobody had the power to stand for our rights when "sharing" was the issue. So I don't see how anyone would be able to stop it when they go after online currency.
I know thats an entirly different group (the IRAA and IRS). But for awhile there I was more afraid of the IRAA than the IRS. I actually wondered if it was legal to have my friends listen to my CD's while we drove in my car.
"NO Officer, I wasn't sharing my music with my friends."
What has our world(s) come to?

Technically, your SL fees would be counted as a business expense. So if your Lindex money is used to pay for your SL account, only the money left over would be profit, and only that money would be taxed.

Ultima Online actually had a problem with this: all their volunteer helpers had to be "fired" because UO wasn't paying them minimum wage, wasn't paying worker's comp, and wasn't paying Social Security.

Apparently, there is a fine line between "volunteers" and "under-paid employees".

According to LL, L$ have no value. As long as you don't convert them to real money, they would never be taxed.

You Must work for Nova LOL

bhodi is that you? *cleans her glasses and puts them back on.

*hijacks the thread to *glomp* Marilyn* hiiiiiiiii!

Hey i pay taxes alot! but you don`t even come close to what native japanese pay.