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."

We've had this discussion before

[CrazyJim1]

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.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:Bigger Problems Then Taxes

[Sancho]

And suppose you're not farming, and just playing. Is all that gold still considered income because you *could* have sold it?

Well, you're not really selling it. See, it's all owned by the MMO owner. There's even something in the EULA about that. So if the IRS comes knocking on my door, I'll just pull out the EULA and explain that they should go talk to Blizzard.

(Not that I play WoW anymore, but you get the idea.)