A Small Curiosity About RL Taxes And Second Life

[Roman Warden]

Forgive me if this isn't the right place to post, but this is my first time really using

these forums.  Only took me 6 years eh *lol*

 

All jokin' aside I've had a question that's been naggin' at me.  I build once in a blue moon -

nothin' fancy, just these small art pieces.  I had been thinkin' of maybe sellin' them at some

point, but I'm unsure how that might relate to real world tax laws.  My real question is: if

at some point I had the means to add a PayPal account, and I wanted to 'cash out' my

earnings, would I need to file tax information for that?

 

(example: say I had a PayPal account and I had 20000L I made from selling my artwork,

and I wanted to 'cash it out' *I wish LOL*.  Would I need to file tax information for that?)

 

I apologize if my wordin' is a bit off - again, this is my first time really postin' here and I'm

(admittedly) not very good at understandin' that part of Linden Labs TOS.  If anyone needs

me to share more I will do my best to clarify.  If it helps at all, I live in Florida (U.S.).

[irihapeti]

if you are going to be cashing out on some regularish basis then best to talk to a tax accountant about it. Are you acting as a business of of some kind. Stuff that a tax professional can advise on

+

generally tho whatever you cash out is income (of some kind). Income you do have to declare. So yes is liable to tax in some way

[Qwalyphi Korpov]

You may want to look here:

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

 

[Robert Galland]

Consult a tax professional in your jurisdiction. You may find you cash out less than needs to be reported.

[LlewLlwyd]

SIX years here means you have probably bought a lot of Linden dollars, and could justify merely exchanging them back for real currency, especially since you probably won a lot of 'Sploders, quizzes, popularity competitions and even accumulated funds by gambling when it was still legal - assuming such things are legal in Florida.

***As I point out to my clients, paying tax should be thought of as a voluntary charitable contribution to a deserving cause***

[Roman Warden]

^ That's the thing: I've never bought Lindens with RL money (and don't plan to) and I've never had payment iinfo on file (and don't plan to until I get this answered).  Every Linden I ever earned was without payment info on file, 100% in-world.  Not sure if that helps, but I probably should've put that in my original post.  My bad.

[Bobbie Faulds]

Until you actually cash out and exchange the Linden for real cash, you don't have to report anything. I believe they start wanting tax info if you are cashing out a total of 600 USD a month or more. Then they'll send you a 1099, if you are in the US, at the end of they year and you'll file as self employed if you make over the US income limit. Again, good idea to talk with a real accountant, not the neighborhood tax preparer that's around this time of year.

 

[Bree Giffen]

Yeah, it's $600 or more that will prompt LL to send the IRS a 1099-misc. You'll get a copy too. $2,000 in a year will make LL send a 1099-k. Since LL doesn't have your tax information beforehand, they won't ask you for anything until they cross that threshold of payments.

[LlewLlwyd]

---

Roman Warden wrote:

^ That's the thing: I've never bought Lindens with RL money (and don't plan to) and I've never had payment iinfo on file (and don't plan to until I get this answered).  Every Linden I ever earned was without payment info on file, 100% in-world.  Not sure if that helps, but I probably should've put that in my original post.  My bad.

---

YOU don't think LL keep accurate historic records of this, do you, and how are they to know how the monies have accumulated in your account? If the tax man comes to call start explaining about disposable alts, buying Linden Dollars from now defunct SL Banks, winning beauty competitions dressed as a bisexual robot, and turning tricks as an 18 year old co-ed.

***Is the IRS going to argue that you were servicing johns, rather than accepting gifts from virtual boyfriends?***

[Bobbie Faulds]

Until you actually convert the Lindens to real money, it's not worth anything other than an exchange inworld. The IRS doesn't care what your balance is in a virtual world. They only care if you cash it out and deposit it in a real world account. Until then, nothing is real.

Oh...for the OP, one thing you might think about is deposit to Pay Pal. LL then doesn't have your info and you can get a PayPal debit card now so you never have to send it to your bank account. I believe you can use a prepaid card, like the ones you can get at WalMart, to open the PayPal account with. You do that and no one will have your RL info.

[Chase011488303235]

Bobby the wiki document says:

 

What tax-related documentation do I need to submit to Linden Lab?

If you reach certain L$ sale transaction volumes, the forms you’ll need to submit depend on where you live:

• U.S. residents will need to complete Form W-9
• Non-U.S. residents will need to complete boxes 1-5 of part 1 of Form W-8BEN

So does this mean that you don't have to do any paperwork with LL/IRS unless you cash out balanced over $600mo? Or if you decide you don't cash out at all then LL does not require any documentation ever? Thanks for clarifying ^

 

[Bobbie Faulds]

Exactly. The money isn't real until you actually cash it out. Until then, it's just an exchange method within a virtual world

[Chase011488303235]

Thanks again Bobbie! I just happened to stumble onto another thread today and someone there said the amount is $600 for the year, and you say its $600 for the month. Do you know for sure?

 

 

[Keekee Kyrie]

LL can track who you give money to objects you give to them and when and where you do it. So yes and i know this from experience dealign with LL. They can tract all if need be.