So LL will be sending 1099s, beginning with 2018

[Sudane Erato]

So LL will be sending 1099s, beginning with 2018. Not on your cash-outs, in US$s (if you are a US person), but on L$ transactions! The sum total of all your L$ transactions, in all of your avie accounts, will be reported, in the US, to the IRS. 

 

???? Where do they get the idea that they can document, convincingly, to the IRS the US$ value of EVERY L$ payment you have received? And along with that question... will LL now give us access to all our 2018 L$ EXPENSE transactions, along with a method for convincingly declaring the US$ value of those? So that... hey... fair is fair. A business is composed of INCOME and EXPENSES! LL is sending a 'convincing" 1099K to the IRS of the total of every payment you have received, but of course "not required" to provide the means to generate documentation for your expenses. So, while this new step will require MANY SL business owners to file the income and expenses of their SL business on a Schedule C, or, if they are lucky, on a LLC or corp tax return, they have NO way to convincingly document what those expenses were.

Sorry... this is really another LL scam. No advance notice. Nothing to prompt business owners to retain monthly transaction logs. No mention of the mechanism by which L$s are translated into US$s (the IRS could care about L$s... they deal in US$s!). Once again, LL kicks its customers, especially the ones who generate most of the income for LL, in our collective faces. Shades of 2010 again.

 

Sudane...............................

 

 

[Wulfie Reanimator]

This is for L$ sales, not sales in L$.

If you sell stuff on SL for lindens, that's not what's getting reported. If you sell lindens on Linden Exchange for US$, that's being reported as income. 

The reason why there was no advance notice seems to be because this requirement is very recent, but I can't confirm. 

Reporting your personal income is far from a scam as well. Not doing that would be the real scam.

Edited February 5, 2019 by Wulfie Reanimator

[Sudane Erato]

Document please?

 

[Wulfie Reanimator]

2 minutes ago, Sudane Erato said:

Document please?

You linked it.

"As a requirement to ensure that we are adhering to respective state laws for reporting taxes, some of you may be receiving a 1099-K form if you have reached a certain Linden $ sale transaction volume."

This is not talking about receiving lindens.

Edited February 5, 2019 by Wulfie Reanimator

[Theresa Tennyson]

3 minutes ago, Sudane Erato said:

Document please?

 

http://wiki.secondlife.com/wiki/Linden_Lab_Official:Required_Tax_Documentation_FAQ

(Under the section starting with "I use PayPal with...")

"The information on a Form 1099-K you receive from Linden Lab will be based only on the gross proceeds from the sale of L$. This is the information we are required to include on the form. If you use PayPal with your Second Life account and also receive a 1099-K from PayPal, it would include payouts to your account as well as other activity you may have with PayPal. It is your responsibility to inform the IRS of the profits or losses of your in-world business on IRS Schedule C."

[Pamela Galli]

23 minutes ago, Sudane Erato said:

Sorry... this is really another LL scam. No advance notice. Nothing to prompt business owners to retain monthly transaction logs. No mention of the mechanism by which L$s are translated into US$s (the IRS could care about L$s... they deal in US$s!). Once again, LL kicks its customers, especially the ones who generate most of the income for LL, in our collective faces. Shades of 2010 again.

I get so tired of this snowflake crybaby stuff. And I don’t mean from LL.

[Sudane Erato]

I read that, but it seems to me from looking at all the statements contained in the wiki, that they are referring to transactions other than those made on the Lindex. If it is only Lindex transactions which they are reporting, why didn't they say that? This is not clear. I'd be happy to be informed that it's only the transactions which are really US$ transactions (the exchange of L$s for US$s) which they are reporting...

[Pamela Galli]

3 minutes ago, Sudane Erato said:

I read that, but it seems to me from looking at all the statements contained in the wiki, that they are referring to transactions other than those made on the Lindex. If it is only Lindex transactions which they are reporting, why didn't they say that? This is not clear. I'd be happy to be informed that it's only the transactions which are really US$ transactions (the exchange of L$s for US$s) which they are reporting...

Sigh. As most of us know, game tokens are not money. 

Learn something before you accuse LL of “scamming”. 

Edited February 5, 2019 by Pamela Galli

[Pamela Galli]

32 minutes ago, Sudane Erato said:

So LL will be sending 1099s, beginning with 2018. Not on your cash-outs, in US$s (

Not beginning with 2018. Yes on your USD.

 

[Blush Bravin]

2 hours ago, Sudane Erato said:

So LL will be sending 1099s, beginning with 2018. Not on your cash-outs, in US$s (if you are a US person)

 

2 hours ago, Sudane Erato said:

but on L$ transactions!

Adding to my post here: pasting what was actually said in the blog post.

As some of you located in the United States may know, it is tax season. Important documents go out to report sensitive information to the appropriate government agencies every year.

As a requirement to ensure that we are adhering to respective state laws for reporting taxes, some of you may be receiving a 1099-K form if you have reached a certain Linden $ sale transaction volume. This form collects information the IRS requires from US taxpayers. Please note that these are time sensitive documents that will need to be completed in order to meet these requirements.

Also adding description of the tax form used from the wiki:

 

What is a Form 1099-K? Why would I receive one from Linden Lab, and when?

This form is used to report to the IRS the gross proceeds earned from L$ sales transactions in a calendar year. Linden Lab is required to file this form for US residents who reach certain transaction thresholds. For U.S. residents with 200 or more L$ sale transactions with a total amount of gross proceeds in excess of $20,000 in a calendar year, we are required to file a Form 1099-K with the IRS reporting those transactions for that year.

**bolding and red text are mine for emphasis. 

____________________________________________

This isn't new. I had to give LL my tax info years ago when I reached the threshold for process credits. I had to do the same recently for Sansar process credits. It's income plain and simple and as a US citizen we have to report income. It's always up to us to show our operating costs for tax purposes. We wouldn't expect our RL store customers to provide that information would we?

Edited February 5, 2019 by Blush Bravin
fixed my response because I read the OPs post incorrectly

[Sudane Erato]

Well, what you're saying makes perfect sense and is perfectly acceptable. But it sure doesn't read that way to me. In my experience, "cash out" has always meant the same as "process credit"... i.e. get cash out of LL. I can totally understand LL wishing to report "process credit" transactions, since they are transmitting funds to another person. But that's not what they say, and the verbiage really suggests otherwise.

 

[Blush Bravin]

11 minutes ago, Sudane Erato said:

Well, what you're saying makes perfect sense and is perfectly acceptable. But it sure doesn't read that way to me. In my experience, "cash out" has always meant the same as "process credit"... i.e. get cash out of LL. I can totally understand LL wishing to report "process credit" transactions, since they are transmitting funds to another person. But that's not what they say, and the verbiage really suggests otherwise.

 

I first responded using the terms you used thinking you had taken those terms from the actual blog post from LL, but you didn't. They don't use the terms you are using in the post. They don't say cash out or process credit. I had to change my response once I realized what was actually said by the Lab. 

Please read my amended post. And re-read all the documents linked by LL in their blog post carefully. 

[Luna Bliss]

My CPA is very competent in these matters, having done a lot of research. She said the gov is wising up to all these unusual currencies and busily making laws so they get their taxes.
She says even $L are income that must be reported. For example, I pay for an ad each month in $L I earned (amounting to about $40.00 usd) and I report that as income even though it's never converted to $, and I am taxed on it. However, fortunately this is a business expense and so it's a wash -- I don't actually lose any money.
** This only applies if your income is high enough.

[Sudane Erato]

I'm clipping Blush's quote above, with her emphases:

This form is used to report to the IRS the gross proceeds earned from L$ sales transactions in a calendar year. Linden Lab is required to file this form for US residents who reach certain transaction thresholds. For U.S. residents with 200 or more L$ sale transactions with a total amount of gross proceeds in excess of $20,000 in a calendar year, we are required to file a Form 1099-K with the IRS reporting those transactions for that year.

An L$ sale transaction is not the same as a "process credit" transaction.  An L$ sale transaction COULD be a goods or services sales transaction in SL (monthly tier paid to the merchant in L$s)... or it COULD be the sale of L$s on Lindex. But it is surely not a "process credit" transaction, whereby RL currency (in our case in US$s) is transferred from LL to our personal bank account or Paypal account. There are no L$s involved in "process credit".

So perhaps the announcement refers only to L$s "Sold" on the Lindex in exchange for US$s. That's really an exchange transaction, but I guess you could call it a "Sell"... yes, they do on the Lindex, saying that you wish to "Sell L$s". But it could easily and also refer to sales made in world where L$s are the currency of sale. That's what 1099K forms are used for in RL. They are used by credit card companies, or "third party payment transactions", to report revenue flows to the IRS. I think its really on LL to clarify more thoroughly what they mean here.

And, regardless. They have NOT issued 1099K forms before for L$ sale transactions. And it's the very clear message of the LL blog post that they will be issuing these for the 2018 tax season.

I'm really with Luna and her CPA here. SL revenues are not "game tokens" (thank you Pamela). L$ is a real medium of exchange, albeit controlled by LL. All L$s we earn in SL are real income, in some cases in the hundreds of thousands of RL dollars per year, and could be taxed as real business income. No dispute about that. But expenses incurred in carrying on that business are real money as well. If LL proposes to report L$ sales to the IRS based on some currency valuation formula, they MUST also provide residents the means and tools to document our expenses as well, so that business transactions can be fairly reported. Unless this announcement is in regard ONLY to Lindex "Sell L$" transactions, where the supporting documents are entirely covered by the monthly "Statements" (entirely in US$s), I repeat the claim that LL has violated again the confidence of its customers.

 

[Wulfie Reanimator]

Maybe @Linden Lab should pop in to clarify so we don't have to guess anything.

[Pamela Galli]

31 minutes ago, Sudane Erato said:

I'm really with Luna and her CPA here. SL revenues are not "game tokens" (thank you Pamela). L$ is a real medium of e

I have a CPA too. The TOS you agreed to states that Lindens are not money. 

[Luna Bliss]

23 minutes ago, Pamela Galli said:

I have a CPA too. The TOS you agreed to states that Lindens are not money. 

Put some attorneys in a room with flexible or rapidly changing laws and they can come out with interesting results.
What is considered 'money' for tax purposes can easily be declared 'not money' by a corporation.

* I just emailed my CPA and informed her that she is doing battle with a CPA in Texas  

[Chic Aeon]

6 hours ago, Theresa Tennyson said:

http://wiki.secondlife.com/wiki/Linden_Lab_Official:Required_Tax_Documentation_FAQ

(Under the section starting with "I use PayPal with...")

"The information on a Form 1099-K you receive from Linden Lab will be based only on the gross proceeds from the sale of L$. This is the information we are required to include on the form. If you use PayPal with your Second Life account and also receive a 1099-K from PayPal, it would include payouts to your account as well as other activity you may have with PayPal. It is your responsibility to inform the IRS of the profits or losses of your in-world business on IRS Schedule C."

Just wanted to note that there is a WARNING uptop of the wiki page (most all wiki pages I believe) that you are not allowed to copy info etc ONLY LINK to that page. 

 

 

[Chic Aeon]

The wiki states (assuming it is still correct --  and I am paraphrasing) that only folks with over 200 "sales" and making over $20,000 in a calendar year need to worry about this. 

It would seem to me that folks doing THAT well, must  already be keeping track of everything as a business and filing appropriate taxes on US income derived from SL (what arrives at Paypal). 

 

Edit: I DO agree that it makes very little sense to report "lindens earned" and much MORE sense to report US dollars cashed out  -- since it isn't "really money"  until it is taken out of game.      

Edited February 5, 2019 by Chic Aeon
adding more info

[Blush Bravin]

5 hours ago, Sudane Erato said:

So perhaps the announcement refers only to L$s "Sold" on the Lindex in exchange for US$s. That's really an exchange transaction, but I guess you could call it a "Sell"... yes, they do on the Lindex, saying that you wish to "Sell L$s".

When I read it, I take it as the selling of Lindens and not selling merchandise for which I earn Lindens. 

5 hours ago, Sudane Erato said:

And, regardless. They have NOT issued 1099K forms before for L$ sale transactions. And it's the very clear message of the LL blog post that they will be issuing these for the 2018 tax season.

I don't know where you're getting the idea that they've not issued these before 2018. It doesn't say that anywhere in the blog. Way back when I had to give over my tax info I was notified that I would receive a 1099K if I met the threshold. That was a good many years ago.

 

5 hours ago, Sudane Erato said:

I'm really with Luna and her CPA here. SL revenues are not "game tokens" (thank you Pamela). L$ is a real medium of exchange, albeit controlled by LL. All L$s we earn in SL are real income, in some cases in the hundreds of thousands of RL dollars per year, and could be taxed as real business income. No dispute about that. But expenses incurred in carrying on that business are real money as well. If LL proposes to report L$ sales to the IRS based on some currency valuation formula, they MUST also provide residents the means and tools to document our expenses as well, so that business transactions can be fairly reported.

This falls into the category of a business owner keeping records and receipts to support their tax return. I hardly see why LL would be responsible to keep records for expenses such as the one Luna used as an example.

 

5 hours ago, Luna Bliss said:

My CPA is very competent in these matters, having done a lot of research. She said the gov is wising up to all these unusual currencies and busily making laws so they get their taxes.
She says even $L are income that must be reported. For example, I pay for an ad each month in $L I earned (amounting to about $40.00 usd) and I report that as income even though it's never converted to $, and I am taxed on it. However, fortunately this is a business expense and so it's a wash -- I don't actually lose any money.
** This only applies if your income is high enough.

I'm curious do you also report $L as income when you spend $L on clothing for your avatar? If no, I don't see the difference. As a merchant with a very small business I've never spent $L for advertising nor have I considered that I need to keep a record of $L I spend on my annual premium membership that pays for the parcel my store occupies.

For me, SL is much more about playing in a virtual world than making a RL income. I've always believed, erroneously perhaps, that all monies held inside SL do not have to be reported. Now I really would love clarification from LL, but I think they will most likely say to contact my accountant or the IRS. 

Edited February 6, 2019 by Blush Bravin

[Wulfie Reanimator]

1 hour ago, Chic Aeon said:

Just wanted to note that there is a WARNING uptop of the wiki page (most all wiki pages I believe) that you are not allowed to copy info etc ONLY LINK to that page. 

You mean this?

Quote

Official Linden Lab® Information: You may access and link to this page, but you may not copy, distribute, modify, adapt, or translate any content on this page. This content is subject to the Terms of Service and is not available under the Creative Commons or any other license.

This is a licensing disclaimer, not a warning to ever dare to copypaste something from the wiki to a forum, lol. Basically translates to "don't use this for your own purposes."

Edited February 5, 2019 by Wulfie Reanimator

[Chic Aeon]

1 hour ago, Wulfie Reanimator said:

You mean this?

This is a licensing disclaimer, not a warning to ever dare to copypaste something from the wiki to a forum, lol. Basically translates to "don't use this for your own purposes."

Yes, I meant that and it has been mentioned here before that we are not supposed to copy and paste info from there into the forums. Perhaps an official LINDEN can give us some input on that currently. The contact us link on that page is NOT for asking that question it seems :D.   I will continue to paraphrase and not copy and be safe under the TOS, thankyaverymuch LOL.  

@Dakota Linden

Edited February 6, 2019 by Chic Aeon

[Chic Aeon]

2 hours ago, Blush Bravin said:

Now I really would love clarification from LL, but I think they will most likely say to contact my account or the IRS. 

And one will say one thing and another will say another. NUMEROUS attorneys could never agree if the infamous TOS of August long ago was legal; I can't imagine that the accountants would agree either. The law can be interpreted in oh so many ways -- hence lawyers :D.  

[Luna Bliss]

Linden dollars are classified as a convertible virtual currency:

"Linden Money is a centralized virtual currency that is solely used in a virtual world called Second Life. Second Life is a social game with a virtual economy where players buy and sell goods using Linden Money. Players convert their real money, e.g. euros, into Linden dollars at the game’s official currency exchange site known as LindeX. Like a traditional exchange platform, market and limit buy and sell orders are conducted among the players. As of 2016, an average of 250 Linden dollars could fetch you $1 US dollar. FinCen, the U.S. Financial Crimes Enforcement Network, recognized Linden Money as a convertible centralized virtual currency in 2013.

 

The nature of convertible virtual currencies, makes them susceptible to use as vehicles for money laundering, tax evasion, and terrorist financing. This has led to some countries proposing regulatory measures on how the currencies will be observed and used for tax purposes. In the US, FinCen guidelines rule that virtual currency that can be exchanged for legally recognized money is property, not money, and will be treated as such. Tax principles that apply to property transactions therefore apply to these types of currencies. A taxpayer who receives Bitcoin or Linden dollars in exchange for goods and services has to record the fair value of the virtual currency in US dollars as of the date it was received. This value is included in computing the taxpayer’s annual gross income. In addition, virtual currency used for investing is regarded as a capital asset and is therefore subject to tax on its capital gains or losses."

https://www.investopedia.com/terms/c/convertible-virtual-currency.asp

Edited February 6, 2019 by Luna Bliss

[Luna Bliss]

2 hours ago, Blush Bravin said:

I'm curious do you also report $L as income when you spend $L on clothing for your avatar? If no, I don't see the difference. As a merchant with a very small business I've never spent $L for advertising nor have I considered that I need to keep a record of $L I spend on my annual premium membership that pays for the parcel my store occupies.

I can't remember the last time I purchased clothes, but yes I am to keep a record of anything I've earned in SL no matter what I spend it on, and it is considered income. I frequently buy textures and mesh that I use on creations or for sims I create for others, and I do report that as income since I used the $L that I earned from MP or inworld sales to purchase the mesh or textures. However, it's also a business expense so with that deduction it really does not cost me any money to report it for tax purposes.

Now clothes...hmmm...perhaps I need a new outfit to travel to a sim and see if they'll hire me. It would be a business expense...I must look nice you know... ;0