If I cash out, what would I declare it under? (taxes)

I mean what do you call it? Normally I use turbo tax so I am sure there would be some question that it would fall under.

also, I keep hearing that if its under a certain amount you won't need to report it, I have heard $600, but I dunno.

And federal is one thing, but what about state?

I know this question gets asked a lot, but I never get much of a straight answer.

ok here is how it works.
How much did you put in, "invested to make money"
How much did you take out "profit or loss"
Both governments expect you to pay taxes on the income.
But this is a game and they do not send you a W9 at the end of the year
so unless you are taking out Income, ur $600 number then ur ok.
Else it becomes a business and it all has to be reported.

Please, talk to your tax advisor. Do NOT ask here!!! Serious advice.

I would be *extremely* cautious about how to declare, if you are over certain limits. I won't even pretend to tell you what that income limit might be, for fear of making a mistake.

If you are in the United States, the US Internal Revenue Service takes a *very* dim view on 'income made without any work done' - if you want to put the biggest red flag possible under the nose of the GAO bull, that's the one.

Money for work generally incurs wage taxes, and triggers all manner of things such as medicare, social security payments, &c &c. Other forms of income might incur capital gains taxes.

And unlike most people's perceptions on the matter, US tax law is one area where it's 'presumed guilty BEFORE proven innocent.'

Please, please, please, please see a tax advisor. I did, and learned enough to not even *dare* try advise anyone else. The audit you save may be your own.

Good luck, and congratulations for being one of the sharp ones that is actually trying to do things right.


Edit: another interesting feature of 'what constitutes work or not' is that the default assumption by the IRS is that money is made BY work, and the burden of proof is on you that you do *not* owe medicare, social security taxes and so forth. I won't even speculate about how that applies to second life. But I have no doubt this law will be tested in this context, within the next 10 years.

Here is a link that may help clear up some things:

http://www.irs.gov/faqs/faq12-7.html

I echo Desmond's statement and extend it to encouraging you to investigate for yourself as well. I've had some bad problems with "tax professionals" in the past and, ultimately, even if someone else does your taxes, *YOU* are still responsible if they screw up.

I am a firm believer in educate thyself, because no one else is going to cover your tail when the taxman cometh.

If you are in the U.S., go to http://www.irs.gov as well as the revenue department site for your state and read up on how to declare income from SL.

400 dollars is the most you can not declare because of a hobby, otherwise it is ordinary income.

Unless of course, you have incorporated.

If you're talking about U.S. federal income taxes, you report your income and expenses on Schedule C.

Report the amount you cashed out as income on Line 1.

I think the easiest place to itemize your expenses is in Part V.

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf


Your state probably has a similar form.

My accountant filed it on Schedule C, Profit or loss from Business. That schedule tells you where to show it on your 1040 form, on mine it was Line 12 Business income or loss as after deducting allowed business expenses I showed a small income.