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IRS Eyeballing Virtual World Tax Policies
Kotaku points out a Washington Post report about this year's recommendations from the national taxpayer advocate (an official who suggests improvements and updates to the tax code) which include developing clearer protocols for reporting taxable income from virtual worlds. We've previously discussed the implementation of such policies in China. Quoting the report summary (PDF): "By one estimate, about $1 billion in real dollars changed hands in computer-based environments called 'virtual worlds' in 2005. ... IRS employees have been unable to respond to taxpayer inquiries about how to report transactions associated with them. Economic activities in virtual worlds may present an emerging area of tax noncompliance, in part because the IRS has not provided guidance about whether and how taxpayers should report such activities. To improve voluntary tax compliance, the National Taxpayer Advocate recommends that the IRS issue guidance addressing how taxpayers should report economic activities in virtual worlds."
You truly can never escape the two inevitabilities of life: death, and taxes.
Web Hosting: Unlimited storage and bandwidth: $5/month
Course you can escape the second. Simply have no income.
Shai Schticks:"You don't make peace with friends, you make peace with enemies"
No taxation without representation. Please vote Spongebob.
If your generating enough income from "virtual worlds" that it needs to be taxed...
Well, taxes are probably the LEAST of your problems.
flat income tax. only way to go. anyone have a clue about how much freaking money is wasted on calculating this crap? its in the hundreds of millions of dollars annually.
I think we concluded that if we can write off losses in the virtual world, and pay our real tax in WOW dollars that it would be welcomed by all gamers.
God spoke to me.
Insightful? You've got to be fucking kidding me
I meant WOW gold.
God spoke to me.
If they want to tax real money gained for selling virtual items/services, that's fine. Technically it's already taxed under the 'Other Income' category.
On the other hand, if they want to take my Everquest Gold, or my World Of Warcraft Epic Mount, they can byte my virtual posterior. It doesn't exist, it can't be taxed.
Even if you took the route of "if you sold it for real money..." you still can't tax it. If you did, then you could be taxed for your car (you could sell it), your blood (you can sell it several times a month), your grandmothers old knicknacks (you might inherit them, then sell them), etc. All in all, a stupid idea.
So, they're going to be taxing my sales at the auction house?
That sounds like a pain, but I guess I can always go out and grind for more.
To apply tax to things when they earn real income. For example, if you sell 3000 in WOW gold on ebay for US$500 (to make up an example since I don't know real values), you have to pay tax on the US$500 just like any other income. In that case you would not pay any tax at all on the ingame stuff.
The only issue comes up with currencies like the Linden Dollar that can be converted back and forth with US$ and other currencies, for those you could treat it like any other currency (presumably if I give you 500 euros as payment for something, thats still income and has to be reported as such, the same could apply to L$)
The IRS only exists in the real world. It should stay there. Otherwise, it could cause a reality breach, and soon find itself the target of thousands of nuclear warheads, tens of thousands of orcs, millions of heavily armed commandos, and a giant green pulsating penis.
Slashdot: Playing Favorites Since 1997
After reading the site linked to in your sig, I could feel my IQ drop.
Er... sorry, little bit of misreading there. On second look, you weren't talking about voluntary taxes, you were talking about flat tax. Well I'll just go cry in a corner now...
Taxation of virtual worlds will mean players will have ownership over their accounts (currently trying to monetize your WoW assets is a bannable offence), and fraud and theft in virtual worlds will fall under standard criminal statutes.
Trying to enforce that mess will drain resources from trying to create copyright cops or other nonsense.
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CINC, 4th Penguin Legion
Fake money has no real value until converted to real currency. And this article, this topic, is a bit tricky.
Person A pays Person B to do a task in a virtual world, and gets paid virtual money. If the virtual money is converted to real currency, sure, why shouldn't it be taxed?
Person A pays Person B to do a task in real life, and pays that person in virtual money. If the virtual money is converted to reall currency, sure, why shouldn't it be taxed? But, would it be legal to pay someone virtual money for a task done in real life? There's minimum wage laws and whatnot.
We're in a grey area here. But, common sense dictates, if something is converted to real money, it should be taxed, right? If I somehow get a billion dollars in virtual world money, then sell it to someone on eBay or whatnot, hypothetically, why shouldn't I be taxed on that?
Can I write my WoW characters off as dependencies?
Gaming companies by and large insist that they own everything within the game. Basically a player "owns" stuff the same way a monopoly player "owns" his cards, houses and money, i. e. only in the context of the game. If there is a transition to real world money (gold on ebay), that is already taxable.
"Beware of he who would deny you access to information, for in his heart he dreams himself your master."
Is it voluntary or compliant?
Funny how there was no income tax until 1913, and now they want to tax some "Imaginary Property" ??
How 'bout we focus on the real problems such as Social Insecurity being broke (I.O.U.S.A.), becoming poor in order to receive benefits, or the outright theft by Haliburton, instead of worrying about virtual ones.
End the bullshit - one simple tax law: 10% of any income. No fucking loopholes. Plain and simple that doesn't requires thousands of wasted pages.
I can't wait when money disappears in the 25th century and people learn to put TRUE stock in something that only increases in value -- themselves -- instead of artificial things.
--
"The more corrupt a republic, the more numerous its laws." -- 56 - 117 AD
The vast majority of the complexity in the tax code comes from figuring out what exactly qualifies as income. Flat tax proposals like yours address none of the complexity issues.
I think prostitution ought to be legal, but it'd be foolhardy to base all exchange on sexual favors. Actually, on the second thought...
is there an IRS in the virtual world?
Will we get a Taxman mob?
Large boss, slightly human looking but with fiery red eyes and decaying flesh. Fights with a magical Tax Form and spawns an army of goblin-lawyers as adds.
Players will only have time to go OMGWTFBBQPWNED before they die.
I think the sticking point is over whether the virtual money should be assigned a value before you cash it out too. With other goods, even sometimes hard-to-value ones, it is: if someone pays your consulting bill with a rare baseball card, you have to value the baseball card and consider it income when you receive it, not just when you sell it.
If virtual money isn't taxed when it changes hands, then it can be used as a tax dodge. since a bunch of economic activity can go on using virtual money as a tax-free medium of exchange, with taxes only paid on the net that gets cashed out sometime later.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
If you already own stock and it goes up in value, then yes, you don't pay taxes on those capital gains until you sell the stock and the gains are realized.
However, if you receive stock, e.g. as in-kind payment for services, you have to value the stock and pay taxes on it as income when you receive it, not when you sell it.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
"people learn to put TRUE stock in something that only increases in value -- themselves "
Some people decrease in value after a certain age.
And some people have negative value.
If it applies to online games, then it also applies to offline games too surely?
So lets take for example the game Monopoly:
The classic version of the game officially comes with $20580, and $5890 worth of assets, it costs $13.99 for a box.
So that gives approximately $1892.07 Monopoly dollars to the US dollar.
Every time you pass go, you incurr therefore just under 11 cents of real world taxable income.
Every time someone lands on Boardwalk with a hotel you will need to add $1.05 to your tax forms.
Also remember that you should be able to offset any losses too.
I am unsure as to how the IRS will reconcile the fact that at the end of the game you give it all away (put it back in the box) - does this count as a charitable donation? Will we need to obtain charitable organisation status for our games cupboards?
Nobody would argue that income suddenly became immune from income tax simply because it was earned using a computer and the internet. OK, which have convoluted rules about cross-border transactions, but not income tax. I think you'll also find that the taxmen also have existing arrangements (took 30 seconds on Google to find that) to deal with any attempt to use alternative currencies or barter exchanges as an end-run around tax.
The only difference between income from selling software or art on your dollar-priced internet shop and income from running a virtual hat shop in Second Life is a sprinkling of fairy dust. If second-lifers try too hard to make it sound like something new, different and scary, the danger is that the tax authorities will be only too keen to invent new, different and scary rules...
What I find depressing is that these "virtual worlds" are all taking the form of capitalist economies. Communism/Socialism may or may not work in the real world, but if I'm going to move to a virtual world which is supposedly limited only by the imagination of its inhabitants, I'm holding out for a post-scarcity utopia like The Culture or even the freakin' United Federation of Planets! If you don't have property then its much harder to have tax...
In a survey of 100 programmers, 111111 thought that duck-typing was a good idea.
It was brought up about the income from second life, and the irs has ruled in the past ti counts as income once it's converted to real world dollars based on the fact there is a variable rate (similar to how you stocks are not taxable till cashed out, but dividends you receive are taxed as income) It gets even simpler in most of the games out there. Since it's all owned by the game company and real world selling is against the rules. But it still falls under the other income field on your tax form if you violate the TOS or use say SOE's marketplace to sell in game items for real world money. Remember they busted Al Capone not for any of his other crimes, just tax evasion because he didn't pay the taxes on his income from his illegal operations. When you convert it in any way to real world money, it is now income and taxable.
The solution to all this, as advanced by the publishers of MMO games (such as Blizzard) is that all virtual assets are the property of the publisher. Therefore, players have no right to buy or sell any virtual assets and cannot be taxed for them.
They could give the big banks their bailout money in the form of City of Heroes influence.
Don't tell me you didn't notice the quick switch at the end and "He was wearing a cowboy hat". CowboyNeal (Or in this case, Cowboy-Kneal :-)
Kevin Smith on Prince
Yes, you can deduct business expenses.
This is exactly the reason why taxation isn't anything to get hysterical about. If you make so much money from selling stuff that you actually have to pay taxes then you should be taxed -- just like all the other businesses selling stuff.
Now if only peddlers of religion were held to the same standard.
Isn't this how the Boston Tea Party started? How can they possibly think to tax online gamers hard earned gold without some form of representation? This is blatantly taxation without representation.
... at least ... 130" tall so that each representative can be rendered at his/her real size ... and full sound systems for each so that their voice can be HEARD!
...err ... tax golds to work! How about a fast train system linking Ironforge to Undercity? Faster gryphon rides? or better yet ... FASTER LOGIN QUEUES for overloaded servers??
I, for one, think that this opens up a need for seats in congress for Night Elves, Gnomes, Orcs, and even Tauren (as long as they promise to first take a bath). Sorry Humans, you've already got enough reps on the hill. We'll need HUGE multi-panel monitors setup all around the House chambers
And why stop there? We need seats on appropriations committees, too! Lets put those tax dollars
Until we get all of this, I say we should each buy Tea from a local vendor and then drop it while standing at the harbor in Booty Bay. Below is a helpful list of some of the teas which might be appropriate:
Honeymint Tea, Green Garden Tea, Thistle Tea, Goldthorn Tea, or even Green Tea Leaf
"Glory is fleeting, but obscurity is forever." - Napoleon Bonaparte
How do you tax a game? What about losses?
if income is made, it is taxable. if a service is given, it is a service. if a trade has been made (even if items are virtual), it is trade.
same laws and rules applicable with twists.
Read radical news here
I'll just move my assets to Northrend as an offshore tax haven.
If you read the EULA it states that you don't own these things.
Unless you're using the MMPOG to generate real world cash the only tax liability I see is on the part of the people running the games. If you're using the game to generate cash then you already fall under the current tax law.
I find being offended by me offensive.
So, this is what I am wondering. I created some virtual items in SL and sold them for a couple of years and made a decent Linden profit with 0 investment. Then, last fall I cashed out around $500 worth of my Lindens to apply to a new computer. I am sure I need to pay taxes on this, but they don't send out W2's or anything and I have no idea what to report it as. I have always done my taxes online with TurboTax and now, ironically, because of profit earned in a virtual world, I might have to go see a real tax man.
Nevermore.
I guess the problem could be if people start to use virtual currency as real money. For example, if I bought something non-virtual from someone using WoW gold. Then someone buys my services for gold. After a while, this virtual money begins to serve the same purpose as real-world money, without ever leaving the game, and the IRS probably wants a share of that.
Or have I misunderstood this?
Ok sure, just a couple of quick questions... ... one, are my raiding supplies and repairs deductible?
two, since this a tax on virtual goods, mind if I pay in virtual currency?
Don't rush me, Sonny. You rush a miracle man, you get rotten miracles.
This is just another moneygrab.
Everyone knows the Government is supposed to support itself through tariffs on imports.
Paying income tax only encourages them to keep it up.Not teaching where the government chose illegal activity in public school has led to a several generations of conned people who know no better(even worse,9 out of 10 lawyers are morons on the subject too.)
As I look at my watch I see it's time for a bloody revolution. I suggest killing any IRS agents that appear in your game.Get a screenshot of you dancing around their remains,teabagging and post it.
*Repent!Quit Your Job!Slack Off!The World Ends Tomorrow and You May Die!
Just e-mail them some virtual money. No. Wait. Better not. The government has been creating virtual money for decades, and the government doesn't like competition. You know what it does with criminals.
The vast majority of the complexity in the tax code comes from figuring out what exactly qualifies as income. Flat tax proposals like yours address none of the complexity issues.
hate to use this phrase but: paradigm, please get out of the box and leave.
always mosh clockwise
Will gold farmers be taxed by the bushel, pixel or click?
I'm a little confused about how this tax would pan out. What exactly would they be taxing? Lets use the example of World of Warcraft. Are they saying that they would be taxing the selling of the ingame currency and/or the selling of accounts? The last time i checked, both of this are against the terms of use that blizzard had set up for the game...
0 investment? You mean you had a free subscription to SL all those years?
Even in the real World, they usually send out W2s only if the amount was more than $500 for that one year, not $500 over the course of multiple years.
In any case, I assume you're salaried, so you could have added that amount ($200 a year or whatever) to your 'other income' column. With the IRS, even non-monetized barter is taxable as income, you just have to estimate/guess how much that amount is for that year and declare it as income (not that many people even know about this).
What the fuck was that?
Though it is possible to make it work if the government give out a tax refund appropriate to the level of tax recieved from an average american purchasing.
Still hugely unfair because the rich get more benefit from the police, fire services and armed forces (because they have more to lose if they don't exist and because they get more attention when they need it).
Heck, they get more from education: and educated workforce is more efficient. However, the individual worker just gets the benefit of one person's efficiency gain, whereas the shareholder taking a cut of the profit is gaining the benefit of EACH WORKER'S education-fuelled efficiency.
Watch the video of Aaron Russo - http://www.care2.com/news/member/686815120/912349
The IRS produces the law that shows anybody *has* to pay any tax to them.
They try to get the 16th amendment actually ratified by the required 2/3 of the STATES
They create a tax that is not violate the Constitution:
Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers . . .
- United States Constitution, Article 1, Section 2, Clause 3
No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.
- United States Constitution, Article 1, Section 9
But most importantly every piece of garbage working for the IRS commit sepuku for their voluntary and dishonorable betrayal of their fellow American. If the IRS wants to collect something from me, I should be ready to give them a nice fresh log of shit in a couple hours. I always got a virtual log of shit ready for them.