IRS Eyeballing Virtual World Tax Policies 226
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."
I guess it's true... (Score:2, Insightful)
I guess it's true...The night income died. (Score:2)
Course you can escape the second. Simply have no income.
Re: (Score:2)
Idiocracy [imdb.com]?
Re: (Score:3, Interesting)
Re: (Score:2)
I bet given enough time, we'll come up with a technical solution to this "death" problem.
Re: (Score:2)
Strictly speaking, that offers some insight into troll psychology. Or someone accidentally hit insightful when they meant to pick troll. Alt accounts are also a possibility.
It's the CowboyNeil option (Score:2)
No taxation without representation (Score:3, Funny)
No taxation without representation. Please vote Spongebob.
Bigger Problems Then Taxes (Score:4, Insightful)
If your generating enough income from "virtual worlds" that it needs to be taxed...
Well, taxes are probably the LEAST of your problems.
Re: (Score:3, Insightful)
No, the economy has just gotten THAT bad.
Re:Bigger Problems Then Taxes (Score:5, Insightful)
Not even that. The average tax-payer in the US is hit for 35-40% of earned income. How much more do they need before they realize that they're wasting money. Most of the US tax dollar is already going to non-military spending. We're a federalist republic, the federal government SHOULDN'T be paying for every program, it should be up the states on anything other than a certain couple of programs.
J
Re: (Score:3, Insightful)
We're a federalist republic, the federal government SHOULDN'T be paying for every program, it should be up the states on anything other than a certain couple of programs.
I might be more convinced by that argument, except California is currently doing its best to prove to the world that state legislatures are even more incompetent at coming up with a rational budget than the federal government. The lesson I'm getting here is that the same types of people get elected to the state and federal levels of government, but at the federal level there's some scrutiny and accountability as opposed to the state level.
I'm not making any statement as to what SHOULD be the case, and I to
Re: (Score:2)
California is currently doing its best to prove to the world that state legislatures are even more incompetent at coming up with a rational budget than the federal government.
Not even close. The federal deficit is far larger percentagewise than the California budget hole. California is forbidden to have deficit budgets, unlike the feds; the feds have been running deficits for so long that people are used to them -- thank you, GWB!
Re: (Score:2, Insightful)
What that proves is that the people of California (and just about every state) are proving to be incompetent at selecting who represents them.
"You'll do what for me? Oooohh.... I'm voting for you!"
Re: (Score:3, Insightful)
Re: (Score:2)
You're sure that's enough to fix it? I suspect the real problem and the only solution has to do with spending on law enforcement. No one ever got voted out of state office for beefing up law enforcement. I have not looked at the budget, so don't use that prediction for anything, but I'd be suprised if cutting back on federal funding would solve the problem even if that was an option.
Re:Bigger Problems Then Taxes (Score:4, Insightful)
Re: (Score:2)
I thought that 40% of tax payers in the US didn't pay any net tax (from Wikipedia's Income_tax_in_the_United_States). I guess that the median tax payer pays about 10%, and the top tax payers pay a fortune. That's pretty common pattern in democracies - a small minority gets gerrymandered into taking it in the rear, for the benefit of the majority. In Australia it's worse - the rich don't pay tax, and the poor don't pay tax, but well off wage earners pay a fortune.
Re: (Score:2)
No, the median tax payer pays ~50%. The major taxes in the US are Medicare, SS, Income tax, Sales tax, and Property taxes. Out of these Medicare and Income tax scale with income but as a percentage SS, sales, and property taxes tend to drop as peoples income increases.
Re: (Score:2)
Actually he's posting on slashdot. No mouth movement is being done.
Re:Bigger Problems Then Taxes (Score:4, Interesting)
So can I deduct my new gaming rig as a business expense?
If they tax gold farming as income, gamers should have the right to deduct their account costs, computer, and internet use as legitimate business expenses (provided they make some money from their endeavors).
When I say should, that is my moral judgment, and it doesn't mean the IRS won't try to screw people.
Re: (Score:2)
And suppose you're not farming, and just playing. Is all that gold still considered income because you *could* have sold it?
If you play any sort of game IRL, and win something that has value IRL, you're stuck with the taxes whether you sell it or whatever. So there's a good argument that you'd be stuck with the taxes on the virtual gold you get. It has value whether you plan on selling it or not.
But that could turn a whole lot of causal players off of the game. Why play an MMORPG and get taxed when you
Re: (Score:3, Informative)
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.)
feh (Score:2, Insightful)
Re:feh (Score:4, Interesting)
Why do tax stories always bring out the extremists?
Not everybody draws a clean salary. What is your income rate if you are buying and selling virtual goods? Heck, what is your income rate if you're buying and selling real goods? Or if you buy a good and the value goes up, but you haven't sold it yet? What if you're trading goods with value for other goods with value, and it never passes through a cash phase? What if a portion of your salary is drawn against goods that you have on loan to others?
A flat income tax isn't the answer. Forgetting about how it would shift the tax burden to those least able to pay, it would still be a nightmare of bureaucracy anyway. It would just be a different bureaucracy.
Considering the 2008 US federal recipts was in the range of 2.5 Trillion dollars, a cost of 500 million spent dealing with th emoney would be actually only .00002 of the total. That's less than one fiftieth of one percent. That's a monetary transaction cost that any business would love to have, and is a hundred times better than the 2% or so of every transaction that Visa skims off the top.
Re: (Score:2)
Why do tax stories always bring out the extremists?
Because taxes have never been fair and never will be. Thus there are always people to complain about it.
Re:feh (Score:5, Insightful)
The US constitution doesn't guarantee any of these things. It does, however, create a legislature empowered to raise funds and spend them for the general welfare. And as we live in a democracy, and the vast majority of us support the programs you mention, you're going to just have to suck it up. Or convince us to change our minds: good luck with that.
Re: (Score:3, Insightful)
Re:feh (Score:5, Insightful)
Re: (Score:3, Insightful)
Who is running against her? Does her opponent agree with her? If not, is he worse than her in other important ways? It's quite possible that the voters do know what they are doing; they just don't have anyone better to vote for.
Re: (Score:2)
It's likely that since we as a country continue allowing public funds and the "independent" media to reinforce the two-party oligarchic system, the two parties will keep electing themselves to power.
So long as that is the case, not very many many quality candidates with differing viewpoints will run. Of those who run, only those who manage to be backed by the two main parties in spite of their differences from the party line will get any airtime. Ross Perot opened a major window of opportunity in this count
Re: (Score:2)
One thing that a lot of people forget -- you can vote for anyone you want as long as they satisfy the legal requirements, even if their name is NOT on the ballot.
Now the standard response to this is "But I don't want to throw my vote away." Fine, then don't. If the person elected to the post finds that they won with a whopping 21% of the votes cast instead of the 52% they received the previous
Re: (Score:2)
If nobody better wants to do the job, then you've got the best.
If the "best" is crap, well that's the People's fault isn't it?
That's what you get when you have a "Government by the People".
Re: (Score:2)
I don't know if we share the same legislators, but I have had the same experience over and over and over again. Each time I contact my representatives, I am sent a FORM LETTER telling me that they are going to do whatever they darn well please and I can stuff my opinion, but hearing from their constituents is *very* important to them and thanking me *so* much for sharing my views.
Representatives, indeed.
Re: (Score:2)
You need to actually get out and campaign for someone you can trust. Everyone wants change, but it doesn't just happen. I used to, before moving, have a US House member who responded with very specific wording to the issues I brought up. Well, it was likely a staff member of his, but the wording was still very specific to what I wrote about. I can be confident it wasn't a form letter. Unfortunately, he and I still differed on what the policy of Congress should be on some things I wrote to him about.
The bigg
Re: (Score:2)
You need to actually get out and campaign for someone you can trust.
There is no such person. They're all finks.
Re: (Score:3, Insightful)
It's a republic of representative democracies. Which is functionally different than either a direct democracy or a representative democracy. Each state is fairly autonomous. Things that are legal in one state are illegal in another. The other states and the fed can't stop each other from doing this.
Also it used to be one of the core differences in the major political parties. Dems want to take away state right and Rep want to strengthen state rights. Well it used to be that way. Now the only differen
Re: (Score:3, Insightful)
Re: (Score:2)
The constitution of Missouri guarantees the right to a "free" public education. Whether the taxes being paid and mismanaged is better than an unfunded mandate to send your kids to school and lower taxes remains to be seen.
Re: (Score:3, Insightful)
It will never happen. What it comes down to is a choice:
1) Use a passive system that does not have to rely on the gathering and verification of data from individual citizens. No paperwork. No money spent on preparing taxes.
2) Use an active system that allows control over information, excuses to invade privacy, reasons to seize property and bank accounts.
Which one do you think the US government prefers? Which one favors their "war on Terrah"? Taxes are just as much about how to control people and informa
Re: (Score:2, Flamebait)
Which one do you think the US government prefers?
The one that works.
We're already in a spending deficit and people think that taxes are too high. If it were all voluntary, we aren't talking about the military having to cut back, we're talking about the military being unable to muster enough strength to defend ourselves against CUBA. And then suddenly taxes are once again not voluntary.
Control people? That's a ridiculous way of putting it. Oops, sorry, didn't see your tinfoil hat.
Ignore my last post (Score:2)
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...
Re: (Score:2)
A passive system requires "no paperwork" but it requires a far greater invasion of privacy. I agree it would be far easier for the citizien to simply let the Government automatically determine what your tax burden is without filling out forms and paperworks but that requires the government to intimately track how many children you have, what your income was for the year, how much money you spent on medical expenses, what the value of your home is, how much you payed in interest for student loans... etc etc
Re: (Score:3, Interesting)
Well all of your considerable comment aside, MY passive system requires no math and has ZERO invasion of privacy.
I was not thinking of a flat tax rate on an existing system involving the IRS. I was thinking getting rid of the IRS entirely. I was actually thinking something along the lines of a consumption tax. I admit that I misread the comment of the poster I was replying too. I should have not implied that a flat tax has no paperwork, associated control over citizens and their information.
I don't want
Re: (Score:2)
I stopped reading at "consumption tax" - all sales taxes are inherently regressive (that meaning the poorer someone is the higher percent of their total income goes to tax)
Re: (Score:3, Insightful)
Re: (Score:3, Interesting)
Feh indeed. Both "flat" sales and income taxes are scams.
Come back and let's talk when:
your "flat" income tax covers all the money a person has coming in, whether it's wages, tips, dividends, interest, capital gains, inheritances, rents, gifts of more than nominal value, bonuses, options, frequent flyer miles, use of company vehicles; or
your "flat" sales tax covers everything of value that is sold, whether goods, services (including those of advertising agencies, lawyers, architects, accountants, and hooke
Re: (Score:3, Insightful)
Yeah, I know those people cheat already, but why make it legal.
So, you're advocating continuing to screw the general public on taxes because you like having a legal basis to punish the wealthy for being wealthy?
Re: (Score:2, Flamebait)
What's wrong with you? You're not part of the trust fund crowd. Why are you continuing to argue against your own interests?
Leave morally-loaded words like "punish" out of this. The question is whether a given policy creates a desired result. Progressive taxation has historically produced societies that are happier and more productive in general. Is the abstract idea of a billionare keeping all his unfathomable wealth more important to you than the health, happiness, and dreams of millions?
Comment removed (Score:5, Insightful)
Re:feh (Score:5, Insightful)
Re: (Score:2)
Thank you. I knew I could find a supporter around here.
Re: (Score:3, Insightful)
There is only one "fair" flat tax and that is a flat wealth tax. Of course, you will never hear that coming out of the mouth of any of the flat taxers who only are interested in a tax system that benefits the upper and upper middle class.
Rich people are already benefitting from the current "so called progressive" tax system as evidenced by the growing gap between rich and poor. And everyone with a tiny bit of economic understanding knows why. The current tax system is highly in favor of those who own capita
Re: (Score:3, Informative)
Re: (Score:2)
So, you're advocating continuing to screw the general public on taxes because you like having a legal basis to punish the wealthy for being wealthy?
So, you're advocating screwing the general public on taxes because you don't want to close the loopholes the rich (individuals and corporations) use?
Re: (Score:2)
Re: (Score:2)
I don't get it. A 'loophole', is a LEGAL method, working within a law to do something legal...in this case, keeping as much of your tax dollar as possible. It is not cheating if it is not illegal.
Are you against people keeping as much of their hard earned tax dollars, legally within the system as possible? What
Re: (Score:2)
Are you against people keeping as much of their hard earned tax dollars, legally within the system as possible?
Nope. I'm for fixing the laws that permit (primarily) upper-income people and corporations to escape paying their fair share. Then everybody's rates can be lower.
The usual suspects who advocate "flat tax" for income want to tax wages, but give a free ride for those whose income is from other sources like rents, dividends, interest, capital gains, inheritances. I can see how this would be attract
Re: (Score:2)
That's why I'm more for a flat tax...on the consumption side.
Everyone spends money...the rich spend a LOT of money....so,
Re: (Score:2)
Seems to me that you are taking my point, assuming that I mean something else,
My mistake. In my defense, you are the first person I have ever heard suggest a flat tax who actually meant "flat". All the others I have heard had a long list of loopholes that should be maintained, so I assumed you did too. It was an erroneous assumption.
I'm not sure if I support a true flat tax (on either income or sales) or not, but it's an idea well worth consideration. If it could be enacted before packs of weasels desce
We've had this discussion before (Score:3, Informative)
Excuse me (Score:2)
Re: (Score:3, Funny)
I meant WOW gold.
Gold hell, do they take wolf pelts?
Re: (Score:2)
I invested a lot of time (therefore money) to get those things, now they aren't worth diddly.
In a way, I don't mind being taxed, but it works both ways.
The solution is... (Score:3, Interesting)
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$)
Re: (Score:3, Interesting)
It's actually closer to 30,000 gold for 500 dollars.
However, what if you bought bits of that gold for 200 dollars? Can you write that off as a business expense? Can you write off your salaried time? If you bought Epic Armor to sell, but an expansion suddenly made it less valuable, can you write it off as capital depreciation? What if you spent salaried time to get Epic Armor, only to have to write down that value on a re-balance?
It gets messy. IRS issuing guidelines could clear up a lot of the messy de
Re: (Score:2)
It gets messy. IRS issuing guidelines could clear up a lot of the messy details.
It's a freaking game!!! The guideline should be simple: There are no business expenses you can write off because it's a game, and if you do sell game stuff for real dollars we'll tax your non-virtual ass for it.
Seems pretty simple to me.
Re: (Score:2)
Re: (Score:2)
'In theory, you could hide assets in a game and in that way avoid triggering the AMT.'
Fucking ingenious... though i'm sure there are easier ways than that.
Re: (Score:2)
Re: (Score:2)
It most likely has something to do with this "business" providing no value to society as a whole.
Re: (Score:2)
This taxpayer advocate in the link sounds like anything but. I agree with you, in that the current laws are sufficient. You sell "Virtual Item" on ebay for $500, you pay taxes on those $500 (minus expenses such as game purchase, subscription, etc). It's really not that confusing. They also want enhanced implementation techniques (monitoring) so that happens.
On top of that, it also sounds like they want to figure out a way to tax virtual-only transactions, which is about as inane as finding a way to tax
with other things you have to pay upon acquisition (Score:2)
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
Re: (Score:2)
IRS can't withstand virtual reality (Score:5, Funny)
Re: (Score:2)
You had me until there,.. Picollo's penis doesn't pulsate, it stretches smoothly.
Re: (Score:2)
I disagree, they live in their own world, and should be abolished..
Re: (Score:2)
I can't wait for taxation (Score:5, Insightful)
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.
Re: (Score:2)
The big thing here isn't going to be traditional MMOs, but the 'item shop' games like Fly For Fun, where there is a direct legal conversion between real money and rewards in game. Second Life is definitely going to b
Re:I can't wait for taxation (Score:5, Funny)
Or an even better solution.
The IRS can charge me taxes in WOW items. But I can defend it using WOW laws.
So the IRS agent must catch me in a raid and take my items by force. Because if I'm in a WOW world I'm going to fight by WOW rules and kick his sorry tax collecting ass.
Just think how much more interesting collecting a 400 gold piece tax will become when you can draw a sword and protect your property. Of course the IRS raiding parties will be top level well orchestrated teams working in concert across Azeroth it will add a whole new level of excitement every february for most players. The IRS would also probably add bounties for top
level characters leading to an interesting new dynamic of payed free agents for whom money is on the line.
Orrrr... if you sell your gold you report your "Other Income" like you're legally obligated right now. But that would be far less exciting.
*thatoneguy does not play WOW nor has ever played WOW. However adding IRS agents as a force might... just might convince him to open an account.
Re: (Score:2)
Re: (Score:3, Funny)
Your ideas are intriguing to me and I am interested in receiving your newsletter.
Re: (Score:3, Interesting)
Second Life makes this very clear. You own your account. You own your own stuff. You can monetize it. You can even take your intellectual property outside of Second Life and put it on your own server (not that you'd want to, since you'd be alone on your own server). But this is a growing trend for virtual worlds that want to attract and keep content creators.
WoW I suppose is a different kind of virtual world, where it's not so much dependent on user-generated content or user-generated scripts?
Re: (Score:2)
""WoW I suppose is a different kind of virtual world, where it's not so much dependent on user-generated content or user-generated scripts?""
There's a pretty vibrant addon-developer community for WoW, but partially due to the way that Addons are implemented, it's all pretty much FOSS.
The only real-money, direct transaction is paying your game subscription. There are quite a few other things like guild web hosting, voice chat hosting for things like Ventrillo, some paid game guides (both books published thro
Fake money (Score:2)
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 t
Re: (Score:2)
But what happens when you take that "in kind" and convert it to real money? It's a form of income. However, I don't think the government should tax something "in kind" if it is never converted.
Re: (Score:2)
that's a bit different (Score:2)
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.
If this happens ... (Score:3, Insightful)
Taxing Monopoly money next? (Score:3, Insightful)
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.
Re: (Score:3, Interesting)
"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."
Why are you giving them even more stupid ideas? This is Washington we're talking about. Politicians who've never met a stupid idea they didn't like ... like the bailouts.
Mind you, if they're going to st
bullshit doublespeak: voluntary tax compliance ?? (Score:2)
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.) [youtube.com], becoming poor in order to receive benefits [salon.com], or the outright theft by Haliburton [wimp.com], 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
Re: (Score:3, Interesting)
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 tho
Taxman mob (Score:3, Funny)
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.
Re: (Score:3, Funny)
(Virtual) reality check (Score:3, Insightful)
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 [taxworld.org] (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 [wikipedia.org] or even the freakin' United Federation of Planets! If you don't have property then its much harder to have tax...
Unite WOW! (Score:3, Funny)
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 [thottbot.com], Green Garden Tea [thottbot.com], Thistle Tea [thottbot.com], Goldthorn Tea [thottbot.com], or even Green Tea Leaf [thottbot.com]
No ownership no tax - Read the EULA (Score:2)
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.
Re: (Score:2)
I think they're more interested in collecting federal income tax from people who farm e-currency for a living and sell it online.
Luckily the majority of people who do this professionally are not US citizens.
I don't think even the IRS could get laws passed that would tax virtual assets since the consumer never owns them according to the game publishers Terms of Service.