Are SL sales and stipends taxed in the US?

UK's tax authority is having a crackdown on all forms of income, and this Sunday Times article says

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You could even be taxed on fictional profits from online games such as Second Life, if they pop into the real world in the form of special deals or discounts.
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Stipends are a discount aren't they?

Link to article:-

http://business.timesonline.co.uk/tol/business/money/article1874654.ece

Only if you'd actually cash them out, in which case it's probably just the old tax reportable "income".

if you sold your stipend on Linden X you would have to pay taxes on them. Of course its a trivial amount of money.

People who earn money in SL are obligated to pay taxes on it much the in same way that anyone who earns money that wasnt taxed is.

An interesting twist - I sell a part of my in world profits and use that cash balance to cover fees and tier. I don't take money out of the LL cash account, but it is technically income - it is cash that I have earned. I would think that's taxable.

Probably ..

Might be hard to track though. Might be nice if a record was kept somewhere that you could use when filing.

For me its fairly easy. But for others it wont be. Im pretty low on the SL economic food chain.

If you are using the cash to pay tier, the tier would be deductable.

So you can either take the cash-tier and use it as income or use the cash as income and then subtract the tier as a direct buisness expense.

Edit: Gamblers that win money can deduct what they spend on gambling.

I have heard it argued that "taxable income" is the amount that you take out of the system via paypal or check. This makes sense and is the easiest way for revenuers to keep tabs on.

In the United States at least, it might be very hard to list tier expenditure as an expense and get away with it. At least not without a proper business, including business licence, minimum business tax payments and so forth.

Also, type of income matters. If you declare yourself a sole proprietor and you worked to earn the money, that money is subject to wage taxes: medicare, social security, SDI, and a swarm of other small state and federal taxes.

If it wasn't wage income, it's subject to other taxes, like investment taxes.

If I cashed out in paypal, I claimed it as "Other Income" on my taxes.

Im thinking this is pretty legitimate myself.

Does LL 1099 you?

These expenses could probably be itemized as deductions, as could a percentage of your house for office space, internet connection, etc., if you claim your SL cash earnings as self employment.

No.

Of course if someone pays you 20$ a week to watch their kids so they can have a night out, you are liable for paying taxes on that income - and they really dont have to file any paperwork for you.


I wouldnt think LL would 1099 anyone since their stance is the Linden is not real money. And your linden Sales are just them brokering transactions between you and other players.

LL doesnt pay you, the other players do.

Yes, and the threshhold for hobby income is 400 dollars a year.

So if you take out less than that, I wouldn't worry about it.

Then it's an honor system............boy, that's going to be a mess to get any taxes.

Proof of the pudding is receipts.

Say someone pays $L 1000 for some land in a private sim.

The receipt for that $L does NOT come from the sim owner. Look at your CC bill - it doesn't say Fred's Sim Rentals.

It says something else entirely (I don't buy $L, I sell it off on LindeX, so I'll have to ask one of you exactly what your CC bill says).

My guess is that it's Linden Research Inc. on the CC, who can balance the income with the expenses (not counting the 3.5% fee, which is partly CC transaction charges anyhow, and Supply Linden sales of $L which is legitimate income).

There would be no need for the Company to 1099 you, unless it's contracting your services - it's more like a bank or brokerage service.

I get a 1099 from my bank for interest earned. 1099G I think.