Questions regarding taxes in second life

[EveAn01]

hello everyone, i'm thinking of starting a store in the marketplace but one of the conditions is to add a card. The question i want to ask is this; the earnings that i may make in the future need to be reported for taxes purposes and are these earnings shown in the card?  Im planning to use the earnings as L$ only and not to  exchage them for rl money. 

[Nick0678]

No they don't need to be reported and they won't show in your card or whatever. Your card is mostly used for verification reasons.

Those Linden Dollars are inworld virtual currency which means have no real value until you decide to withdraw them as real USD.

(If you withdraw you might have to report them but that depends on your country and other factors)

[Rolig Loon]

22 minutes ago, Nick0678 said:

Those Linden Dollars are inworld virtual currency which means have no real value until you decide to withdraw them as real USD.

Quite  right.  Until you transfer USD out of your Tilia account, you're safe.  If you are in the US and you transfer a lot of money -- I can't remember what the trigger level is -- Linden Lab is required to send the IRS some version of a 1099 form to alert them.  The same may be true for the EU or other countries, IDK.  Even if you never trigger that notice, you may still be responsible for reporting income to your regional (state/province/federal) tax authority, but again, only on money transferred out of the Tilia account.  Consult your local accountant.

[Chic Aeon]

Just wanted to comment that while in the past the money you earned wasn't considered "real" until it reached Paypal or the equivalent and your bank, the US government was trying to make  more virtual currencies taxable. In that your USD Tilia balance would be considered earned US dollars BEFORE they were transferred out.   So any money that was converted to USD to pay tier or membership would ALSO be taxable.  There were some conversations here on the forums about that.   

 

I am not sure how far the new US laws moved along that path, but if it is IMPORTANT to anyone some more research and perhaps consulting your tax folks would probably be wise.   I am not converting linden dollars any longer so I didn't bother to follow up.   Maybe someone reading DID that research and can point to the current tax rules.  

 

The reporting limit USED to be 20,000 USD but all that changed in the last year or so. It "may" be that  ALL income in USD is sent out to the government in 1099 forms. Again, I don't know --- just know that the old rules are likely not the current rules.  

 

 

[Nick0678]

2 minutes ago, Rolig Loon said:

The same may be true for the EU or other countries, IDK.

They only have to send whatever paper work they are supposed to U.S IRS for their own legitimacy. Then the money will be send/converted to proper currency bank account which depends on a lot of factors if someone will report them as income or not, how they will be taxed etc... could be in a tax heaven for example or associated with an offshore etc. Of course if we are talking about peanuts nobody bothers.