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IRS Eyeballing Virtual World Tax Policies

Soulskill posted more than 5 years ago | from the jig-is-up dept.

Government 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."

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I guess it's true... (2, Insightful)

zwekiel (1445761) | more than 5 years ago | (#26413429)

You truly can never escape the two inevitabilities of life: death, and taxes.

Another thing you can't escape: (-1, Troll)

Anonymous Coward | more than 5 years ago | (#26413447)

Ok Slashdot, I'm gonna tell you my first incest experience. It was about 2 years ago; I was 18 and my sister was 16(and a half). We had a cousin staying at our house for the summer and she was either 16 or 17. Got along great with the cousin, but not so great with the sister. She felt she should have the run of the house since I was about to move out to college and I thought she was a bitch. This caused conflict.
 
Anyway, the parents were at work, I was chilling in my room, and the two girls were sunbathing/swimming outside. I had nothing for my sister at this point, but my cousin was a different matter. From an objective standpoint, she's good looking. She's the big athlete in the family so the body is pretty good as well. I would post pics, but I'm afraid someone would recognize her(maybe I'll post with the face blurred...). So I can't help but look out my window every now and again to check her out and maybe jack a bit.
 
Here's where things get crazy. I'm building up jack material on my cousin, but I can't stop looking at my sister. Cousin is hot, but my sister has a RACK. Her boobs look like they wanna bust out of the bikini. So I start storing images of her as well. It feels a little sick at first, but that just makes things more exciting.
 
I want a closer look, so I go outside to the pool and say that I'm going to bust into the booze cabinent and to come inside if they want any. They think it's a great idea and follow me in. They get wasted pretty fast, but I only have a couple drinks. It gets to the point where they're basically passed out on the floor, wearing skimpy bikinis, and I'm sitting there with a raging hard on. So I make the decision.
 
I run to the basement to grab a camcorder and set it up in the den where we are. Just then, my grandpa busts through the door, tears off my pants, and fucks me in the ass. He's wearing a cowboy hat. Once he unloads, he runs back out of the house and yells, "I have the weirding way!"

What? (0)

Anonymous Coward | more than 5 years ago | (#26413547)

Insightful? You've got to be fucking kidding me

Re:What? (1)

philspear (1142299) | more than 5 years ago | (#26413975)

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.

Re:What? (1)

cthulu_mt (1124113) | more than 5 years ago | (#26415873)

I like this new trend in troll stories; the suprise ending makes them worth reading.

I guess it's true...The night income died. (1)

Ostracus (1354233) | more than 5 years ago | (#26413449)

Course you can escape the second. Simply have no income.

Re:I guess it's true...The night income died. (1)

zwekiel (1445761) | more than 5 years ago | (#26413477)

Have no income and never buy anything, ever. Seems like a hard way to live. Remember taxes aren't just confined to income. Most places have a sales tax, property tax, etc.

Re:I guess it's true...The night income died. (0, Offtopic)

darinfp (907671) | more than 5 years ago | (#26414153)

In australia 40% of people effectively pay no tax i.e they recieve more than they pay in govt allowances. I can't see that being sustainable.

Re:I guess it's true...The night income died. (-1, Troll)

Anonymous Coward | more than 5 years ago | (#26415753)

In australia 40% of people effectively pay no tax i.e they recieve more than they pay in govt allowances. I can't see that being sustainable.

It's at least that high in the US. That's what nobody is paying attention to...that you cannot keep increasing taxes on the 'rich' to pay for all of the programs the Democrats are promising to their main constituents: the young, the poor, the black and the stupid.

But they breed faster than anyone else, so guess where we're heading.

Re:I guess it's true... (2, Interesting)

jcr (53032) | more than 5 years ago | (#26414363)

You truly can never escape the two inevitabilities of life: death, and taxes.

I didn't expect the Berlin Wall to come down in my lifetime. It's a long shot, but it's possible that this depression will result in the end of the Federal Reserve and the IRS, both.

-jcr

No taxation without representation (3, Funny)

Anonymous Coward | more than 5 years ago | (#26413469)

No taxation without representation. Please vote Spongebob.

Bigger Problems Then Taxes (4, Insightful)

KronosReaver (932860) | more than 5 years ago | (#26413485)

If your generating enough income from "virtual worlds" that it needs to be taxed...

Well, taxes are probably the LEAST of your problems.

Re:Bigger Problems Then Taxes (-1, Flamebait)

Anonymous Coward | more than 5 years ago | (#26413683)

True, getting my gf's O face script to stop hitching is all I have time for right now.

Taxes? WTF happened to this site?!

Gotta go, hot date at the kid-porium,

Re:Bigger Problems Then Taxes (2, Insightful)

philspear (1142299) | more than 5 years ago | (#26413751)

No, the economy has just gotten THAT bad.

Re:Bigger Problems Then Taxes (4, Insightful)

drik00 (526104) | more than 5 years ago | (#26414305)

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:Bigger Problems Then Taxes (2, Insightful)

philspear (1142299) | more than 5 years ago | (#26414429)

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 too am guilty of not paying attention to local politics.

Re:Bigger Problems Then Taxes (1)

A nonymous Coward (7548) | more than 5 years ago | (#26414847)

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:Bigger Problems Then Taxes (2, Insightful)

Anonymous Coward | more than 5 years ago | (#26415041)

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:Bigger Problems Then Taxes (1)

wisty (1335733) | more than 5 years ago | (#26414915)

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:Bigger Problems Then Taxes (0, Troll)

LordKazan (558383) | more than 5 years ago | (#26416083)

Your mouth is talking, and inaccurate numbers are spewing out of it

Re:Bigger Problems Then Taxes (0, Troll)

ILuvRamen (1026668) | more than 5 years ago | (#26414357)

wrong! The reason I can't sell my in game currency on ebay is because it's just data on the server and the game company still owns it. That's the legal reason why they can and did pull my auctions from ebay! So if I don't own the money, none of my "income" is MY income. They should make up their damn minds I think. You can't say you don't own it to sell it but you do own it to tax it. I don't care either way because if I can start selling gold again then hurray and who cares if they tax it cuz I'll still turn a profit and if they decide the other way, I can't sell my gold but they also can't tax it so I win that way too.

Re:Bigger Problems Then Taxes (3, Interesting)

wisty (1335733) | more than 5 years ago | (#26414883)

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:Bigger Problems Then Taxes (1)

KIFulgore (972701) | more than 5 years ago | (#26415955)

Good insight -- I certainly would. You can deduct just about anything you can reasonably justify as a business expense. I deduct my cable bill and computer equipment as business expenses for my home office.

feh (2, Insightful)

moniker127 (1290002) | more than 5 years ago | (#26413505)

flat income tax. only way to go. anyone have a clue about how much freaking money is wasted on calculating this crap? its in the hundreds of millions of dollars annually.

Re:feh (1)

Kral_Blbec (1201285) | more than 5 years ago | (#26413627)

Wrong. Flat sales tax eliminates even more of the bureaucracy.

Re:feh (2, Interesting)

number11 (129686) | more than 5 years ago | (#26413797)

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 hookers), real estate, stocks, automobiles, gasoline, puppies.

(Granted, getting the hookers to keep proper tax records will be a challenge.)

So far, every proposal I've seen had loopholes for high-income people and/or for business that you could drive a limousine through. Yeah, I know those people cheat already, but why make it legal.

Re:feh (3, Insightful)

palegray.net (1195047) | more than 5 years ago | (#26413923)

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:feh (1, Flamebait)

QuoteMstr (55051) | more than 5 years ago | (#26414257)

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?

Re:feh (4, Insightful)

jcr (53032) | more than 5 years ago | (#26414315)

What's wrong with you? You're not part of the trust fund crowd. Why are you continuing to argue against your own interests?

That's the same line of bullshit that was used to sell us the income tax in the first place. The American people were promised that the federal income tax would only affect the top 1% of earners. Didn't work out that way, did it?

Every "soak the rich" scheme turns into a "soak everybody" scheme in a few years, because of the effects of the even more insidious mode of taxation, which is inflating the currency.

-jcr

Re:feh (0)

Anonymous Coward | more than 5 years ago | (#26414391)

Appeals to emotion are no substitute for compelling, rational arguments.

Re:feh (1)

QuoteMstr (55051) | more than 5 years ago | (#26414427)

Thank you. I knew I could find a supporter around here.

Re:feh (2, Insightful)

Wildclaw (15718) | more than 5 years ago | (#26414395)

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 capital.

Re:feh (2, Informative)

jcr (53032) | more than 5 years ago | (#26414431)

The current tax system is highly in favor of those who own capital.

Duh!

The current tax system is exactly what Hamilton dreamed of. The richer someone is, they more reason they have to support expansion of the federal government. One of the major driving forces behind consolidation of businesses into larger and larger corporations is the death tax, which forces the heirs of family businesses to sell out to pay the tax. Warren Buffet's done very well indeed from that.

-jcr

Re:feh (1)

number11 (129686) | more than 5 years ago | (#26414399)

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:feh (1)

Hognoxious (631665) | more than 5 years ago | (#26415847)

I think he's just arguing that these so-called flat taxes aren't really that flat, when you look at them closely.

Re:feh (1)

cayenne8 (626475) | more than 5 years ago | (#26415485)

"So far, every proposal I've seen had loopholes for high-income people and/or for business that you could drive a limousine through. Yeah, I know those people cheat already, but why make it legal."

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 is wrong with that? You think we should give it all to the govt.? No one should take the housing and other deductions they say we can do to lower our tax liability?

Re:feh (1)

KDR_11k (778916) | more than 5 years ago | (#26415787)

A loophole is when there is an error in the law that permits actions that were not intended to be possible. Are you against patching bugs too?

Re:feh (3, Interesting)

cgenman (325138) | more than 5 years ago | (#26413699)

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:feh (1)

pfarber (1123907) | more than 5 years ago | (#26414145)

The Government uses taxes for behavior modification as much as for revenue. Unless you can clearly realize the taxes are nothing more than legalized extortion (give us your money or we'll take your house) for dubious public good. Where does the Constitution of any State guarantee the RIGHT to low cost public transportation, health care or schools?

Re:feh (5, Insightful)

QuoteMstr (55051) | more than 5 years ago | (#26414249)

Where does the Constitution of any State guarantee the RIGHT to low cost public transportation, health care or schools?

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:feh (3, Insightful)

jcr (53032) | more than 5 years ago | (#26414353)

And as we live in a democracy,

First of all, this isn't supposed to be a democracy, it's supposed to be a republic, and secondly, if you imagine that our government obeys the will of the people, you are sadly deluded.

the vast majority of us support the programs you mention

You're funny.

There was this little incident last year, in which our bought-and-paid-for legislators decided to hand some seven hundred billion dollars over to a bunch of incompetent speculators. This was done despite overwhelming disapproval by the public. In fact, that bitch who purports to represent me in the senate admitted that she had gotten a total of 91,000 calls on the matter, of which 85,000 were against, and she gave a snotty little lecture on the senate floor where she lied through her teeth and claimed that we didn't understand what they were doing.

-jcr

Re:feh (4, Insightful)

TheLink (130905) | more than 5 years ago | (#26414863)

Is she elected? If she is and is reelected in the next election, then the voters really don't know what they are doing ;).

Re:feh (2, Insightful)

Cro Magnon (467622) | more than 5 years ago | (#26415849)

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:feh (0)

Anonymous Coward | more than 5 years ago | (#26415481)

:sigh:

Why do people insist on saying "the US isn't a democracy, it's a republic" the two are in no way opposed to each other.

You can claim that's why you are a representative democracy rather then a direct democracy, but whether you are a republic or not has nothing to do with it.

Republic - Monarchy
Democracy - Dictatorship
Smart - Stupid

Re:feh (2, Insightful)

jcr (53032) | more than 5 years ago | (#26414445)

The Government uses taxes for behavior modification as much as for revenue.

That's what makes it so insidious. We are not property for the government to command.

-jcr

Re:feh (0)

Anonymous Coward | more than 5 years ago | (#26415399)

Taxation is extortion.

Re:feh (2, Insightful)

EdIII (1114411) | more than 5 years ago | (#26413717)

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 information as they are about collecting income for the state.

Re:feh (1, Flamebait)

philspear (1142299) | more than 5 years ago | (#26413803)

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 (1)

philspear (1142299) | more than 5 years ago | (#26413825)

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:feh (1)

im_thatoneguy (819432) | more than 5 years ago | (#26414569)

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.

So really your options are these

1) A passive system where the government knows everything about you and automatically deducts how much you owe.
*Risk being that they mistake you for someone else or have out of date information in which you pay too much.
2) An active system where you control all of the details about your life and only release the relevant details about your life that you think are worth a rebate.
*Risk being that you lie and they get suspicious requiring you to prove your claims.

The Passive system is far far far more invasive than the Active system. The Active system allows you to not even report you have a child to the IRS if you care more about your privacy than your discount.

This is the problem with the "Flat Tax" system. Everybody wants their own little rebates. "I have 2 children. I need to keep them fed and educated!" "I am in college, I shouldn't pay taxes on any student loan interest!" "I own a small business and employ 3 people in the community!".

Everybody from every walk of life has something they don't feel is taxable-- or should get rewarded for doing. "I gave $10,000 to charity!" And I agree most deductions are things that deserve to be deducted.

But... the "Flat Tax" policy still offers these deductions. They just offer them in the form of a Rebate Check. So by the time you've *given back* all the money that the poor, blind, impregnated, educated and housed individuals want in rebates our tax policy is equally unflat... equally complicated and equally difficult to maintain.

If people want a simple tax code it's really really easy. Stop taking DEDUCTIONS! I filled out my taxes in under 15 minutes this year. I looked at my W2 typed in 15 boxes. Did a 5 second estimate in my head that I wouldn't break the $10k automatic deductions and hit send.

It's the people with 5 kids a mortage, a mentally hadicapped step daughter, 3 student loans, a small business under their name and 3 vacation properties on top of a pension fund that have trouble doing their taxes. And the ONLY reason they have trouble doing their taxes is because they want to pay the absolute bare minimum possible taking advantage of every tax break possibly afforded to them. These people would have an equally difficult time squeezing their "refund" out of a flat tax system as they do squeezing their "deductions" out of the progressive tax system.

Let's just face it. Unless we want to unfairly tax people without consideration to special circumstances tax codes are going to be complicated. You can't be both easy and detailed. They're mutually exclusive. The more detailed you want your deductions and more things you want excluded from taxation the more difficult your taxes will become. Get over it. Pay H&R Block $30 or whatever it is they're asking now adays. Or pay $50 for TurboTax.

The only alternative is to open your books completely to the government and let them automatically calculate it. *Cue privacy advocates descending from hell to sing their chorus.

Re:feh (2, Interesting)

EdIII (1114411) | more than 5 years ago | (#26415439)

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 a flat tax. I don't want the federal government to have the right to tax citizens period. My idea is a little bit more "grand" and ambitious than that.

Through constitutional amendments I want to have the federal government draft a bill that gets sent to all the states *each* year. The states are then responsible for paying their portion of the bill, based on how many representatives they have in the House.

I see it as a problem of competition. The IRS has no competition. If California and Texas were both deciding on how to collect the money in the future, and both Californians and Texans could pick their asses up and leave, I think we would start to see some interesting ways get created to collect taxes. States that decide to use draconian systems based on complicated math, obscure paperwork, and government peering into citizens lives will more likely *have less citizens*. Taxes was one of the reasons my family moved away from California.

A consumption tax based state is one based on a passive system. The taxpayer never needs to calculate *anything*. They just pay for their consumption. No paperwork, no accountants, nothing. A taxpayer can't ever be wrong either or liable to the state. So no reason to seize property, put people in prison, or destroy lives. The entire transaction contains everything that needs to be paid to the state.

Of course this pushes all the responsibility onto business. They already collect taxes for the state so it is not like the infrastructure to do this in most states does not exist already.

What about deductions? I think the whole point of deductions is to give tax breaks to people that have lobbied their positions well. Well if we want to make it easier on the families that have kids, the poor, and the middle class in general how about most states deciding that food and other basic necessities don't have to be taxed? Kind of handles that right at the source real nice and easy doesn't it?

That's the problem with tax breaks. They most often involve the rebates that you mention. That is inefficient. If each state sets its tax rate appropriately, than rebates should not even be necessary. As for other tax breaks and incentives I think states and local cities can come up with their own tax breaks to businesses to improve their own local economies.

This seems to be a pretty fair way to do it. The rich complain endlessly that they earned their money and have the rights to keep it. I totally agree. I think they should be able to pull a Scrooge McDuck and build huge moneybins(tm) to hold all their gold and cash. They can sit in their golden mountains for as long as they want. Till they get hungry. That's when they pay taxes on the hamburger they consume. Till they get bored. That's when they pay taxes for their entertainment. When they want to buy a 10,000,000 USD yacht, they pay taxes there as well.

What could be more fair than that? Most of the arguments I get into over this are about how a working class guy will end up paying a higher percentage of his income to taxes than a rich guy. My answer to that is quite simple. Who gives a shit? The rich guy cannot take it with him when he dies and he deserves it for whatever he is doing that is making him rich. It is not the fault of the rich guy that the working class guy does not make more money. In any case, if the rich guy really wants to live like a rich guy his taxes, although being a less overall percentage, will be many many times that of the working class guy.

Ultimately I think most states will end up choosing a passive system in the end since it will be far easier for them to work with it and more enticing to the citizens that live there. In my mind, only the federal government seems Hell bent on knowing and controlling everything and using the IRS as a tool.

Re:feh (2, Insightful)

jcr (53032) | more than 5 years ago | (#26414369)

flat income tax. only way to go.

Limit the activities of the federal government to its constitutional powers, and there would be no need for an income tax at all.

-jcr

We've had this discussion before (2, Informative)

CrazyJim1 (809850) | more than 5 years ago | (#26413527)

I think we concluded that if we can write off losses in the virtual world, and pay our real tax in WOW dollars that it would be welcomed by all gamers.

Excuse me (1)

CrazyJim1 (809850) | more than 5 years ago | (#26413557)

I meant WOW gold.

Re:Excuse me (3, Funny)

Anonymous Coward | more than 5 years ago | (#26413579)

I meant WOW gold.

Gold hell, do they take wolf pelts?

God damn it (0)

Anonymous Coward | more than 5 years ago | (#26413661)

After reading the site linked to in your sig, I could feel my IQ drop.

Re:We've had this discussion before (0)

Anonymous Coward | more than 5 years ago | (#26413593)

Well, it beats Stones of Jordan.

[/Diablo 2]

Re:We've had this discussion before (1)

Fluffeh (1273756) | more than 5 years ago | (#26413609)

If that's the case, I want to write off the depreciation of my leet T6 sets that are now worthless after another expansion.

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.

Re:We've had this discussion before (1)

plasmacutter (901737) | more than 5 years ago | (#26413933)

wow gold has a higher us dollar exchange rate than the japanese yen.

I would find it funny after all the wacky predictions of D&D and usenet becoming the new system of power for the world if businesses actually started accepting wow gold for food and blizzard's patches came under the scrutiny of the fed.

Always looking for a pocket to pick... (1, Insightful)

Anonymous Coward | more than 5 years ago | (#26413559)

If they want to tax real money gained for selling virtual items/services, that's fine. Technically it's already taxed under the 'Other Income' category.

On the other hand, if they want to take my Everquest Gold, or my World Of Warcraft Epic Mount, they can byte my virtual posterior. It doesn't exist, it can't be taxed.

Even if you took the route of "if you sold it for real money..." you still can't tax it. If you did, then you could be taxed for your car (you could sell it), your blood (you can sell it several times a month), your grandmothers old knicknacks (you might inherit them, then sell them), etc. All in all, a stupid idea.

Re:Always looking for a pocket to pick... (0)

Anonymous Coward | more than 5 years ago | (#26414285)

You pay taxes on your car if you realize gains from its sale (e.g., you sell it for more than you paid for it).

You pay taxes when you sell your blood. (What, you thought you didn't?)

You pay taxes on your grandmother's old knickknacks when you inherit them.

Auction house sales? (0)

Anonymous Coward | more than 5 years ago | (#26413569)

So, they're going to be taxing my sales at the auction house?

That sounds like a pain, but I guess I can always go out and grind for more.

The solution is... (2, Interesting)

jonwil (467024) | more than 5 years ago | (#26413641)

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:The solution is... (2, Interesting)

cgenman (325138) | more than 5 years ago | (#26413749)

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 details.

Re:The solution is... (1)

thegrassyknowl (762218) | more than 5 years ago | (#26413867)

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:The solution is... (1)

khallow (566160) | more than 5 years ago | (#26413947)

Baseball is a game too, but some of those people are making several million dollars a year. Frankly, I don't understand why current IRS rules don't apply. If you're making real money income from an online game, then it can be treated either as a hobby or as a job. There are tax laws already in place for both scenarios. Hmmm, maybe it's because they're worried about what happens when your income and assets in games are large enough that they could affect how you are taxed. For example, the Alternate Minimum Tax is based more or less on the size of increase of your net assets each year. In theory, you could hide assets in a game and in that way avoid triggering the AMT.

Re:The solution is... (1)

Idiomatick (976696) | more than 5 years ago | (#26414339)

'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:The solution is... (0)

Anonymous Coward | more than 5 years ago | (#26414043)

So you want to tax gains but not account for losses?

If I make $20,000 selling virtual gold, but I spend $30,000 doing it I've realized a $10,000 loss.

Your "simple" solution requires me to pay taxes on gains I haven't realized. Aside from the obvious ethical problem, there is the practical problem: Where do I come up with 15% of $20,000 when I've already realized a $10,000 loss? Throw me in jail if you must, but I won't be able to pay you money I never had in the first place.

Re:The solution is... (1)

Alex Belits (437) | more than 5 years ago | (#26415077)

It most likely has something to do with this "business" providing no value to society as a whole.

Re:The solution is... (0)

Anonymous Coward | more than 5 years ago | (#26415537)

If you bought gold for 200 dollars, and later sold gold for 500 dollars, that's a profit of 300 dollars. That should be what you report to the IRS.

Re:The solution is... (0)

Anonymous Coward | more than 5 years ago | (#26413965)

So maybe I'm not understanding tax law, but if I sell my car to someone, I have to pay federal taxes on the money they pay me? If I sell my old computer on e-bay I have to pay taxes on that too? I hope I'm not breaking the law, but I've sold lots of cars and old computers and I've never paid any tax on those. I don't see where or why virtual property is different than that sort of physical property.

This is akin to those states trying to claim "use" taxes. Besides being impractical to enforce, how many more ridiculous types of taxation do they have to come up with before people start resisting? Any talk of new or increasing taxes during this time of economic depression seems to be shooting oneself in the foot, imho, especially when they are giving those tax dollars to car companies and banks! I mean seriously, wtf?

And then the article states people are volunteering that they made income from virtual property sales. Again I say wtf?!

Re:The solution is... (1)

rolfwind (528248) | more than 5 years ago | (#26413989)

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 small-time bartering in real life. Well, if the IRS wants to accept virtual currency, let them. Perhaps the US Military wants to upgrade their swords of summoning or whatever.

Everytime I hear of this bloated, useless bureacratic nonsense, I feel obligated to mention the APT-Tax.
http://www.apttax.com/ [apttax.com]

with other things you have to pay upon acquisition (1)

Trepidity (597) | more than 5 years ago | (#26414745)

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 medium of exchange, with taxes only paid on the net that gets cashed out sometime later.

Re:with other things you have to pay upon acquisit (1)

chonglibloodsport (1270740) | more than 5 years ago | (#26415703)

The solution to all this, as advanced by the publishers of MMO games (such as Blizzard) is that all virtual assets are the property of the publisher. Therefore, players have no right to buy or sell any virtual assets and cannot be taxed for them.

IRS can't withstand virtual reality (5, Funny)

MSTCrow5429 (642744) | more than 5 years ago | (#26413649)

The IRS only exists in the real world. It should stay there. Otherwise, it could cause a reality breach, and soon find itself the target of thousands of nuclear warheads, tens of thousands of orcs, millions of heavily armed commandos, and a giant green pulsating penis.

Re:IRS can't withstand virtual reality (1, Funny)

Anonymous Coward | more than 5 years ago | (#26413689)

and a giant green pulsating penis

More and more I regret posting that home video on YouTube.

Re:IRS can't withstand virtual reality (1)

RuBLed (995686) | more than 5 years ago | (#26413889)

and a giant green pulsating penis.

You had me until there,.. Picollo's penis doesn't pulsate, it stretches smoothly.

I can't wait for taxation (4, Insightful)

the_raptor (652941) | more than 5 years ago | (#26413941)

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:I can't wait for taxation (1)

Bieeanda (961632) | more than 5 years ago | (#26414123)

The only thing it'll do for WoW is make Blizzard even quicker to ban farmers, and possibly get your example eBay seller up on fraud charges. The gold isn't yours, any more than any other aspect of the account is, so there's no legal way to exchange it outside of the context of the game itself.

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 be affected by this if it goes through, and I imagine that related blogs are going bonkers already.

Re:I can't wait for taxation (4, Funny)

im_thatoneguy (819432) | more than 5 years ago | (#26414515)

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:I can't wait for taxation (2, Interesting)

stephanruby (542433) | more than 5 years ago | (#26414709)

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:I can't wait for taxation (1)

chonglibloodsport (1270740) | more than 5 years ago | (#26415819)

The IRS doesn't have the power to declare that players own virtual assets when the players already agreed that the publisher owns them by accepting the license agreement.

Fake money (1)

Antony-Kyre (807195) | more than 5 years ago | (#26414003)

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 task done in real life? There's minimum wage laws and whatnot.

We're in a grey area here. But, common sense dictates, if something is converted to real money, it should be taxed, right? If I somehow get a billion dollars in virtual world money, then sell it to someone on eBay or whatnot, hypothetically, why shouldn't I be taxed on that?

Re:Fake money (1)

mdenham (747985) | more than 5 years ago | (#26414047)

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 task done in real life? There's minimum wage laws and whatnot.

Minimum wage only applies to, in general, doing work for a company. (See all the 13-year-old babysitters getting paid $20 for 5-6 hours of babysitting for a fine example of this.) So: yes, it's legal, or as close to legal as you can get (as very few government agencies are going to crack down on someone paying their babysitter $3.50-$4/hr, for example).

Alternatively, you can look at it as payment "in kind" (see here [wikipedia.org] , though admittedly it's very short) rather than in cash, which (if memory serves) isn't considered taxable because there's no exchange of money (either real stuff, or bits over a wire as in electronic funds transfers).

Keep in mind with that last that I am not a tax professional, nor do I even work at H&R Blockhead.

Re:Fake money (1)

Antony-Kyre (807195) | more than 5 years ago | (#26414113)

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:Fake money (1)

mdenham (747985) | more than 5 years ago | (#26414637)

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.

Which is exactly what happens. It's similar to the laws on capital gains - you don't get taxed for those until you actually receive them. (If you got taxed for them when they happened, you'd have thousands or millions of micro-transactions to the IRS just for owning stock.)

that's a bit different (1)

Trepidity (597) | more than 5 years ago | (#26414761)

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.

Re:that's a bit different (1)

mdenham (747985) | more than 5 years ago | (#26415425)

Perhaps. Virtual currency, though, is more like a stock option - while yes, you can buy/sell those, do they actually have a taxable value until the option is exercised?

If this happens ... (3, Insightful)

Aiml (1450363) | more than 5 years ago | (#26414075)

Can I write my WoW characters off as dependencies?

Taxing Monopoly money next? (2, Insightful)

laron (102608) | more than 5 years ago | (#26414201)

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.

bullshit doublespeak: voluntary tax compliance ?? (1)

UnknownSoldier (67820) | more than 5 years ago | (#26414225)

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 disappears in the 25th century and people learn to put TRUE stock in something that only increases in value -- themselves -- instead of artificial things.

--
"The more corrupt a republic, the more numerous its laws." -- 56 - 117 AD

Re:bullshit doublespeak: voluntary tax compliance (2, Interesting)

QuoteMstr (55051) | more than 5 years ago | (#26414283)

End the bullshit - one simple tax law: 10% of any income. No fucking loopholes.

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 can't wait when money disappears...and people learn to put TRUE stock in something that only increases in value -- themselves

I think prostitution ought to be legal, but it'd be foolhardy to base all exchange on sexual favors. Actually, on the second thought...

Re:bullshit doublespeak: voluntary tax compliance (1)

TheLink (130905) | more than 5 years ago | (#26414885)

"people learn to put TRUE stock in something that only increases in value -- themselves "

Some people decrease in value after a certain age.

And some people have negative value.

the real question is: (1)

jameszhou2000 (811168) | more than 5 years ago | (#26414411)

is there an IRS in the virtual world?

Taxman mob (2, Funny)

Aceticon (140883) | more than 5 years ago | (#26414529)

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:Taxman mob (2, Funny)

Culture20 (968837) | more than 5 years ago | (#26415541)

Even Scarier: It's nigh invulnerable, and does damage to Gold instead of Hit Points. Maybe it could be paired with Death.

How "virtual" do the worlds need to be? (0)

Anonymous Coward | more than 5 years ago | (#26414947)

If it applies to online games, then it also applies to offline games too surely?
So lets take for example the game Monopoly:

The classic version of the game officially comes with $20580, and $5890 worth of assets, it costs $13.99 for a box.
So that gives approximately $1892.07 Monopoly dollars to the US dollar.

Every time you pass go, you incurr therefore just under 11 cents of real world taxable income.
Every time someone lands on Boardwalk with a hotel you will need to add $1.05 to your tax forms.

Also remember that you should be able to offset any losses too.

I am unsure as to how the IRS will reconcile the fact that at the end of the game you give it all away (put it back in the box) - does this count as a charitable donation? Will we need to obtain charitable organisation status for our games cupboards?

(Virtual) reality check (2, Insightful)

itsdapead (734413) | more than 5 years ago | (#26415389)

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...

was brought up about SL... (1)

Hellershanks (1315357) | more than 5 years ago | (#26415663)

It was brought up about the income from second life, and the irs has ruled in the past ti counts as income once it's converted to real world dollars based on the fact there is a variable rate (similar to how you stocks are not taxable till cashed out, but dividends you receive are taxed as income) It gets even simpler in most of the games out there. Since it's all owned by the game company and real world selling is against the rules. But it still falls under the other income field on your tax form if you violate the TOS or use say SOE's marketplace to sell in game items for real world money. Remember they busted Al Capone not for any of his other crimes, just tax evasion because he didn't pay the taxes on his income from his illegal operations. When you convert it in any way to real world money, it is now income and taxable.

Sauce For The Goose (1)

FireIron (838223) | more than 5 years ago | (#26415923)

They could give the big banks their bailout money in the form of City of Heroes influence.
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