IRS urged to tax virtual worlds, economies
Posted: Wed Jan 14, 2009 1:22 am
Saw this and said meh, but worth a mention
Published: January 12, 2009 - 01:04PM CT
The Internal Revenue Service should start taxing the fledgling virtual economy in Second Life, World of Warcraft, MMORPG's and other virtual worlds according to Taxpayer Advocate Nina Olson. In her annual report published on the IRS website, Olsen said that there are still a number of issues that the IRS should "proactively address" before they get out of control. And now that it's on the IRS' radar, it's likely only a matter of time before Uncle Sam tries to figure out some way to get a cut of your gold.
As most of our readers know, a number of virtual worlds involve the trade of real money for various virtual products and services inside of the game(s). And wherever people are spending money, someone is making it. Entrepreneurs are making fat cash off the sale of virtual land, clothing, sex toys, and everything in between in Second Life and other games, and now Olson wants the IRS to go after them.
"Economic activities associated with virtual worlds may present an emerging area of noncompliance, in part, because the IRS has not issued guidance about whether and how taxpayers should report such activities," Olson wrote in her report. She points out that almost all income is subject to tax—even prizes, winnings, and barter exchange. She also acknowledges, however, that tracking and reconstructing so many tiny transactions would be a huge burden, and that attempting to place a value on virtual transaction could present serious challenges.
She urges the IRS, however, to establish guidelines on whether (and how) taxpayers should report their activities even if only to help taxpayers better understand what's going on. "IRS guidance could improve taxpayer compliance even if it simply clarified that in-world transactions are not taxable," Olson wrote. "To its credit, the IRS has recently identified a number of issues presented by Internet auctions of virtual property and other aspects of virtual worlds. However, the IRS should consider doing more to help taxpayers comply with their tax obligations by quickly issuing guidance addressing how to report economic activities in virtual worlds, as well as in other emerging areas of economic activity."
This isn't the first time the concept of taxing virtual worlds has come up. Since at least 2003, people both on- and offline started looking at the tax implications of virtual economies, and Dan Miller, senior economist for the congressional Joint Economic Committee, started entertaining the idea of taxing MMORPGs in 2006 after diving into the world of online gaming himself. As noted by Silicon Alley Insider, however, collecting taxes from virtual world activities could very well put a serious hamper on the virtual economy. No one likes to jump through bureaucratic hoops just to play an online game, after all.
Published: January 12, 2009 - 01:04PM CT
The Internal Revenue Service should start taxing the fledgling virtual economy in Second Life, World of Warcraft, MMORPG's and other virtual worlds according to Taxpayer Advocate Nina Olson. In her annual report published on the IRS website, Olsen said that there are still a number of issues that the IRS should "proactively address" before they get out of control. And now that it's on the IRS' radar, it's likely only a matter of time before Uncle Sam tries to figure out some way to get a cut of your gold.
As most of our readers know, a number of virtual worlds involve the trade of real money for various virtual products and services inside of the game(s). And wherever people are spending money, someone is making it. Entrepreneurs are making fat cash off the sale of virtual land, clothing, sex toys, and everything in between in Second Life and other games, and now Olson wants the IRS to go after them.
"Economic activities associated with virtual worlds may present an emerging area of noncompliance, in part, because the IRS has not issued guidance about whether and how taxpayers should report such activities," Olson wrote in her report. She points out that almost all income is subject to tax—even prizes, winnings, and barter exchange. She also acknowledges, however, that tracking and reconstructing so many tiny transactions would be a huge burden, and that attempting to place a value on virtual transaction could present serious challenges.
She urges the IRS, however, to establish guidelines on whether (and how) taxpayers should report their activities even if only to help taxpayers better understand what's going on. "IRS guidance could improve taxpayer compliance even if it simply clarified that in-world transactions are not taxable," Olson wrote. "To its credit, the IRS has recently identified a number of issues presented by Internet auctions of virtual property and other aspects of virtual worlds. However, the IRS should consider doing more to help taxpayers comply with their tax obligations by quickly issuing guidance addressing how to report economic activities in virtual worlds, as well as in other emerging areas of economic activity."
This isn't the first time the concept of taxing virtual worlds has come up. Since at least 2003, people both on- and offline started looking at the tax implications of virtual economies, and Dan Miller, senior economist for the congressional Joint Economic Committee, started entertaining the idea of taxing MMORPGs in 2006 after diving into the world of online gaming himself. As noted by Silicon Alley Insider, however, collecting taxes from virtual world activities could very well put a serious hamper on the virtual economy. No one likes to jump through bureaucratic hoops just to play an online game, after all.
Idiots.
