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BitCoin Mining, Other Virtual Activity Taxable Under US Law

timothy posted about a year ago | from the them-as-has-gits dept.

The Almighty Buck 239

chicksdaddy writes "Beware you barons of BitCoin – you World of Warcraft one-percenters: the long arm of the Internal Revenue Service may soon be reaching into your treasure hoard to extract Uncle Sam's fair share of your virtual wealth. A new Government Accountability Office (GAO) report on virtual economies finds that many types of transactions in virtual economies – including Bitcoin mining and virtual transactions that result in real-world profit – are likely taxable under current U.S. law, but that the IRS does a poor job of tracking such business activity and informing buyers and sellers of their duty to pay taxes on virtual earnings. The report, 'Virtual Economies and Currencies: Additional IRS Guidance Could Reduce Tax Compliance Risks' found that the growing use of virtual currencies like BitCoin and virtual game currencies warrants the U.S.'s tax collection agency to mitigate the risks. Those include efforts to educate taxpayers and the publication of basic tax reporting requirements for transactions using virtual currencies, The Security Ledger reports."

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239 comments

WoW tax (4, Funny)

WillgasM (1646719) | about a year ago | (#44039455)

How many coppers is this gonna cost me?

Re:WoW tax (4, Insightful)

ArcadeMan (2766669) | about a year ago | (#44039729)

This is the IRS we're talking about. It's going to cost you SILVERS, my friend!

Uhm... (1)

Black Parrot (19622) | about a year ago | (#44039473)

What's a 'barron'?

Re:Uhm... (1)

Anonymous Coward | about a year ago | (#44039551)

barron
Barron is a city in Barron County (of which it is the county seat), in the U.S. state of Wisconsin. The population was 3,248 at the 2000 census. The city is located within the Town of Barron.

Thanks, google definitions.

Re:Uhm... (1)

nitehawk214 (222219) | about a year ago | (#44039579)

The City of Barron is located within the Town of Barron located in the County of Barron?

Yo dawg, I heard you like Barrons...

Re:Uhm... (1)

Mordok-DestroyerOfWo (1000167) | about a year ago | (#44040199)

barron Barron is a city in Barron County (of which it is the county seat), in the U.S. state of Wisconsin. The population was 3,248 at the 2000 census. The city is located within the Town of Barron.

Thanks, google definitions.

They are renowned for the fleet of airships.

Re:Uhm... (1)

houstonbofh (602064) | about a year ago | (#44039607)

What's a 'barron'?

A feudal lord when typed on a smart phone.

Re:Uhm... (1)

Chris Mattern (191822) | about a year ago | (#44039613)

What's a 'barron'?

It appears to be a business magazine. [barrons.com] Not sure what it has to do with the taxation of virtual profit...

Re:Uhm... (4, Funny)

c0lo (1497653) | about a year ago | (#44039675)

The octane number [wikipedia.org] used for lawyers or other legal [wikipedia.org] professionals. In layman term: a measure of how much you can squeeze a lawyer before detonation.

Does it make sense now?

Re:Uhm... (1)

swilde23 (874551) | about a year ago | (#44039705)

It's like a baron, but with more rolling of the arrrrrrrrrrs

Re:Uhm... (1)

NerdyLove (1133693) | about a year ago | (#44039989)

Baron Nashor is the most powerful neutral monster on Summoner's Rift!

tax on capital gains only (5, Informative)

optikos (1187213) | about a year ago | (#44039479)

Keep track of expenses (e.g., equipment, floor space rental, electricity consumption) that serve as the investment for the BitCoin mining. This comes off the bottom-line profit. Otherwise, you would pay 'income' taxes on your 'outflow'.

Bitcoin mining is not capital gains (3, Insightful)

Typical Slashdotter (2848579) | about a year ago | (#44039571)

IANAA (I am not an accountant), but capital gains are only when you buy something and then sell it at a higher price. Buying a bunch of computer equipment and making money by selling it would be capital gains. Buying a bunch of computer equipment and making money by selling the bitcoins it mines is just regular income. You can (and should!), however, deduct the cost of the equipment, etc., as business expenses. The distinction is important because capital gains are taxed at a lower rate than regular income.

Re:Bitcoin mining is not capital gains (3, Informative)

houstonbofh (602064) | about a year ago | (#44039631)

It could be both, if you mine and hold the coins...

Re:Bitcoin mining is not capital gains (5, Informative)

alexander_686 (957440) | about a year ago | (#44039673)

Mod parent up. It’s depreciation expense. Depreciation would either reduce your operating income if you sold the bitcoins the same year you mined them or would increase your cost basis of your bitcoin (thus decreasing your capital gains tax) it you held your bitcoins for more than a year.

Be warned, the IRS makes this stuff complicated fast.

Re:Bitcoin mining is not capital gains (2)

Typical Slashdotter (2848579) | about a year ago | (#44039751)

Honest question: can you actually count the cost of equipment and electricity toward the cost basis of your bitcoins? I thought that, in order to be part of the cost basis, you had to be able to attribute the cost to specific bitcoins, rather than have lump expenses for the month/year/whatever.

Re:Bitcoin mining is not capital gains (2)

alexander_686 (957440) | about a year ago | (#44040115)

You don’t need to attribute to a specific bitcoin but you must be able to attribute to bitcoin mining.

I would guess the rules would be similar to how expenses are allocated for a home office or a pro rata basis. If you home office is 10% of your home, 10% of the your electricity, heating, depreciation, can be written off.

Note, the rules are a lot of subjective and complex rules, people abuse this all of the time, and the IRS loves auditing this type of stuff because it is abused so often. And this is kind of like manufacturing if you hold it for more than a year, so there would be another layer of rules on top of that.

Possible - sort of (2)

sjbe (173966) | about a year ago | (#44040207)

Honest question: can you actually count the cost of equipment and electricity toward the cost basis of your bitcoins?

There are ways to do it if you do it through a business. You could deduct some expenses and you could do the home office deduction. The computer would need to be owned by the business and used primarily for business purposes. There also could be depreciation and other fun involved. Frankly I doubt there would be much profit in it but that's a separate issue.

Note that claiming a home office deduction significantly increases your chance of being audited. It's one of the items the IRS looks for because it is abused so often.

Re:Bitcoin mining is not capital gains (3, Interesting)

lgw (121541) | about a year ago | (#44040247)

IANAA, but that's not how depreciation works. You spend a lot of capital on X to operate your business - it's a cash cost this year, and you want to deduct it from your taxes this year, but the IRS says "no, even though you spent all that money this year, you must spread out the cost of X over N years for tax purposes, so pay us a lot more this year". Depreciation is rarely a good thing, and it doesn't form a basis for capital gains.

I don't think gold miners selling the gold they mine treat that as a capital gain in the first place, AFAIK it's treated like any other manufactured product. The depreciation of the mining equipment is an overhead expense that reduces reported profit appropriately. (The cost of energy is often the primary expense in gold mining.)

Bitcoin "mining" would seem similar, but it's a mistake to assume tax law follows any sort of logic or reason.

Re:Bitcoin mining is not capital gains (2)

Chris Mattern (191822) | about a year ago | (#44039681)

IANAA (I am not an accountant), but capital gains are only when you buy something and then sell it at a higher price.

It's a little bit more involved than that. This is only a capital gain when you actually intend to hold and/or use the assets rather than turning around and immediately selling them again. When a grocery store buys items wholesale and then sells them to its retail customers, that's not a "capital gain", it's just a retail profit. US tax code requires you to hold an asset for at least a year before selling it in order to claim the capital gains tax rate.

Re:Bitcoin mining is not capital gains (1)

PPH (736903) | about a year ago | (#44039741)

When a grocery store buys items wholesale and then sells them to its retail customers, that's not a "capital gain", it's just a retail profit. US tax code requires you to hold an asset for at least a year before selling it in order to claim the capital gains tax rate.

I'm certain that a lot of the stuff in my grocery store has been on the shelf for longer than a year.

Re:Bitcoin mining is not capital gains (2)

pegr (46683) | about a year ago | (#44039943)

But it's not an asset until it's sold. Until then, it's a number with no intrinsic value. Now if you BOUGHT BitCoins instead of mine them, it would be capital gains when you sold them.

Re:Bitcoin mining is not capital gains (1)

cob666 (656740) | about a year ago | (#44040185)

Unless your business was buying and selling BitCoins, then the sale would be classified as regular income.

Re:Bitcoin mining is not capital gains (0)

Anonymous Coward | about a year ago | (#44040261)

Unless your business was buying and selling BitCoins, then the sale would be classified as regular income if you held the bitcoins for less than a year.

FTFY.

And it doesn't matter if it is your business or not. Anyone that buys and/or sells bitcoins is subject to the same taxes.

Re:Bitcoin mining is not capital gains (1)

Chris Mattern (191822) | about a year ago | (#44040251)

Also not entirely true. Traditionally, an asset is kept on the books at what it cost to acquire it. If you bought it, that will of course be the price you paid. If you created it, or acquired it through other means, such as mining Bitcoins, the book value will the cost in labor and capital it took, and your profit (or capital gain--or loss if the price doesn't cover your costs) on sale wiill be the sale price minus that book value.

Long versus short term capital gains (1)

sjbe (173966) | about a year ago | (#44040235)

US tax code requires you to hold an asset for at least a year before selling it in order to claim the capital gains tax rate.

That's for the long term capital gains rate. There is a short term capital gain rate too.

Re:Bitcoin mining is not capital gains (4, Informative)

optikos (1187213) | about a year ago | (#44039761)

http://en.wikipedia.org/wiki/Capital_gain [wikipedia.org]

The key words here are: "financial assets" and "intangible assets". Bitcoin mining is both of these.

from Capital gain's Wikipedia article:

The gain is the difference between a higher selling price and a lower purchase price.

The gain is the difference between 1) the selling price of the financial asset after the mathematics (or after WoW achievement) and 2) the purchase price of the intangible asset before the mathematics (or before the WoW achievement).

Re:Bitcoin mining is not capital gains (2)

Attila Dimedici (1036002) | about a year ago | (#44039809)

The person you are replying to never said it was capital gains. When you have a business, there are expenses which can be deducted from any revenue that business generates. In the case of bitcoins. If I have buy a computer which I dedicate to mining bitcoins, I can deduct the cost of that computer from the money I earn selling bitcoins. There would be additional expenses which could be deducted as well, but since I am not an accountant I will not try to list more because I may be mistaken about which of the other expenses would be legally tax-deductible.

Re:Bitcoin mining is not capital gains (0)

Anonymous Coward | about a year ago | (#44040193)

IANAA (I am not an accountant), but capital gains are only when you buy something and then sell it at a higher price. Buying a bunch of computer equipment and making money by selling it would be capital gains.

Good thing you are not an accountant, because you are wrong.

"A capital gain is a profit that results from a disposition of a capital asset, such as stock, bond or real estate, where the amount realized on the disposition exceeds the purchase price."

What you described is just plain profit from buying and selling a commodity.

Re:Bitcoin mining is not capital gains (2)

sirlark (1676276) | about a year ago | (#44040249)

Buying some land and growing some vegetables on it does not attract capital gains tax either, but nor does it attract income tax until you SELL the vegetables. Also, it doesn't attract tax if you barter the vegetables for something else. From TFA:

GAO said that strict virtual (or “closed flow”) transactions in which virtual currency is used only within a game or virtual environment to purchase virtual goods and services were not taxable.

The IRS is saying the creation/accrual of bitcoins and other virtual currencies is taxable at the point of barter as well as sale. It's not even income, as you've earned no money from selling something. I don't know, this seems like a real over reach on the part of the IRS. It makes perfect sense to tax someone when they sell their bit coins for cash; that's income, but taxing the BUYER for buying an online subscription, or some tech gadget, or a T-shirt and then taxing the SELLER for changing those bitcoins into USD. That's double taxation. As long as you can't pay some countries taxes with it, it shouldn't be taxable IMHO.

Re:tax on capital gains only (0)

Anonymous Coward | about a year ago | (#44039665)

Supposedly you need to pay tax (sometimes called 'use tax'?) on purchases made out of state.
But nobody does. Ever. The law isn't enforceable.

That's why they're now going after retailers to collect out of state taxes.

Re:tax on capital gains only (1)

h4rr4r (612664) | about a year ago | (#44040033)

People do pay it all the time. In my state it is very common to let the tax agency estimate it for you since you probably lack records. Pretty much everyone does that way in my state.

Is this news? (5, Insightful)

Typical Slashdotter (2848579) | about a year ago | (#44039495)

Why wouldn't it be taxed? There is no "on a computer" exemption to rules that we pay taxes on profitable activities...

Re:Is this news? (2)

rueger (210566) | about a year ago | (#44039523)

There is no "on a computer" exemption

Yes there is! It's the same as the "copyright doesn't apply on the Internet" rule.

Re:Is this news? (0)

gl4ss (559668) | about a year ago | (#44039953)

There is no "on a computer" exemption

Yes there is! It's the same as the "copyright doesn't apply on the Internet" rule.

actually that rule is the other way around - even if it wouldn't apply as criminal if you did it in real life it sure as fuck will count if you do it online(copying cassette for a friend vs. sending it as mp3).

Re:Is this news? (1)

ArhcAngel (247594) | about a year ago | (#44039569)

Why wouldn't it be taxed? There is no "on a computer" exemption to rules that we pay taxes on profitable activities...

So if you never make a profit [techdirt.com] you should be good.

Re:Is this news? (1)

h4rr4r (612664) | about a year ago | (#44039605)

That is just for screwing actors and writers. They still pay the IRS their cut.

Re:Is this news? (2)

Typical Slashdotter (2848579) | about a year ago | (#44039657)

Interestingly, Uncle Sam still gets his cut from Hollywood accounting. Hollywood accounting works by making the movie look like a loss by putting all the profits toward fees paid to various executives and agencies. By doing this, the movie gets out of paying royalties due to the wording of contracts. However, all the executives and agencies still need to pay taxes on those fees.

Why it might not be taxed .... (1)

King_TJ (85913) | about a year ago | (#44039813)

While it's not really "news" that the IRS is once again looking for a source of revenue? I'd argue that there's a strange paradox with the whole thing. If the U.S. govt. starts taxing alternative virtual currencies, that indicates by extension they recognize them as legitimate.

I thought a big part of the whole battle for acceptance of these new e-currencies was the idea that the govt. would never recognize them as legal tender, out of fear it undermines the official currency it has control over via the Federal Reserve.

I don't think you can really have this both ways though.... legitimate taxable currency when it works in government's favor and not recognized as valid when it doesn't!

Re:Why it might not be taxed .... (5, Insightful)

h4rr4r (612664) | about a year ago | (#44039901)

Take a deep breath.

They only count as real money when you trade them for real money. Bitcoins are still not money, just an item you can sell like any other thing. If you make a profit selling them, like any other thing, you owe taxes.

Was that simple enough for you?

Re:Why it might not be taxed .... (0)

Anonymous Coward | about a year ago | (#44040227)

However profit = revenue - costs

Therefore you add your costs to your expenses now, since they want to tax your bitcoins. That includes depreciation costs of your PC, electricity and cooling for your PC, your internet connection, the OS, upkeep, etc.

This is why this isn't a good idea: not because it's profit that isn't being taxed (the biggest hole is the multinational corps and reduced inheritance tax), but because so many people will now be able to reduce their tax bills when mining a dozen coins a day.

Re:Why it might not be taxed .... (1)

h4rr4r (612664) | about a year ago | (#44040259)

They will not be able to lower their tax bills 1 cent.
You can only take that stuff up to the level of the profit you made. You can't take a loss on your bitcoin mining operation and apply that to your normal taxes. Well, maybe for a short while, but then the IRS will call it a hobby and you will be out of luck.

Re:Why it might not be taxed .... (1)

MondoGordo (2277808) | about a year ago | (#44040205)

You might be missing the point(or maybe i am) ...

I don't think they are proposing taxing the bitcoins (and other virtual property) themselves, but rather the profit derived from them when exchanged for cash or other tangible assets. I'm not a WoW player ... so pardon any inexactitude in the following ... lets say my dark elf has a "sword of power" that I agree to sell to you for $200 ... my elf drops the sword for your dwarf to pick up and you pay me the money... at this point the IRS wants me to declare that $200 as income and pay regular income tax on it ... for now they they are focusing on virtual currency transactions like BCs because these are (or soon will be) trackable in the real world as financial transactions thru BC exchanges ... that doesn't mean they are legitimizing BC per se but rather saying they want their cut of whatever money you make regardless of what imaginary thing or magic process put that money in you're pocket.

Or put another way ... if you got that money from illegal (or imaginary) activities you still owe them their cut, it doesn't in any way legitimize the illegal (or imaginary) activities.

Re:Is this news? (1)

HornWumpus (783565) | about a year ago | (#44040139)

Why wouldn't it be taxed?

No paper trail. Duh.

Sure (0)

Anonymous Coward | about a year ago | (#44039505)

I'll get right on that, right after tabulating, reporting and paying the 20 years of sales taxes I haven't paid on my internet purchases.

Eh.. (1)

intellitech (1912116) | about a year ago | (#44039509)

You can't tax what you can't see.

Re:Eh.. (2, Insightful)

h4rr4r (612664) | about a year ago | (#44039567)

When your purchases don't line up they sure can see it.

How about instead of being a leech you pay your taxes?

Re:Eh.. (1)

ArcadeMan (2766669) | about a year ago | (#44039773)

Sure. I just hope they have a World of Warcraft account, on the Alliance side, on the Earthen Ring server.

Re:Eh.. (1)

h4rr4r (612664) | about a year ago | (#44039827)

including Bitcoin mining and virtual transactions that result in real-world profit

Only if you make real money do you have to pay. If you only spend your gold on your level 56 my little pony mount and underpants for your elfen paladin you are ok.

Re:Eh.. (1)

gmuslera (3436) | about a year ago | (#44039805)

Look at the other end of the line [talkingpointsmemo.com] . There should be an irony somewhere out there.

Re:Eh.. (1)

houstonbofh (602064) | about a year ago | (#44039635)

They can see your spending...

Re:Eh.. (1)

Virtucon (127420) | about a year ago | (#44039847)

I buy stocks and bonds and never see anything except the paperwork on the transaction, not the physical stock or bond but I still get taxed on those activities.

Re:Eh.. (1)

leonardluen (211265) | about a year ago | (#44040233)

not only that but a couple companies (eTrade, Ameritrade, and some others) released an MMO a while ago where you can play this game entirely online and you no longer need to worry about papercuts from looking at paperwork.

seriously trading stock is now just as virtual as bitcoin or selling gold in WoW

I wonder if they'll be selective again? (1)

Virtucon (127420) | about a year ago | (#44039535)

I mean, only going after Bitcoin miners vs. WoW players? I mean BitCoin miners are conservative, they eat a lot of power and deal with suspicious real world countries, like Panama. They don't come out in the daylight and they spend a lot of time speaking in tongues like "petaflop." I can imagine that the IRS will not have the ability to distinguish the two or to classify properly and therefore they'll start jamming up the process with arbitrary rules and procedures, of which nobody will have a clue as to how to traverse the veritable maze of traps and holes that the bureaucracy will produce.

Re:I wonder if they'll be selective again? (1)

Trepidity (597) | about a year ago | (#44039691)

How are BitCoin miners "conservative"? As far as I can tell, most are some variety of techno-anarchist. That's about the opposite of conservatism, which is about stability, tradition, and respect for authority.

Re: I wonder if they'll be selective again? (0)

Anonymous Coward | about a year ago | (#44039767)

That is hilarious. Most "conservatives" I know have no respect for authority.

Re:I wonder if they'll be selective again? (1)

Virtucon (127420) | about a year ago | (#44039803)

I wouldn't put them in that class, definitely entrepreneurial more along the lines of libertarian business types perhaps? Anarchists wouldn't keep the infrastructure in place to keep mining.

B.S (1)

Reverand Dave (1959652) | about a year ago | (#44039559)

Until I can purchase gas, groceries, and beer with Bitcoins or Battle.net Gold, it's not a real currency. I do know of one drug dealer in my area that accepts bitcoin, but he's not paying taxes on that income already anyway so fake money is fine for him.

On top of that, how do they plan on dealing with things like what happened in D3 a few weeks ago where literally trillions of gold was duped which could have potentially been worth over $100,000? Is duping gold in a game going to become equivalent to real world counterfeiting? If so, who's gonna be responsible to make sure it doesn't happen? I think these fuckers are opening a Pandora's box the likes of which they have scarcely seen before.

Re:B.S (1)

h4rr4r (612664) | about a year ago | (#44039589)

Why would he not be paying taxes?
You have to report that income, and if it is of any real amount you should or you might get caught.

Re: B.S (0)

Anonymous Coward | about a year ago | (#44039845)

I don't get it... Are you actually saying a drug dealer dealing illegal drugs illegally should report his earning to the IRS?

Re: B.S (2)

h4rr4r (612664) | about a year ago | (#44039883)

Yes, of course.
You are required to pay taxes on that income.

That is how they caught Al Capone after all. I imagine lots of small time folks can get away with it, but they should be paying their taxes like everyone else.

Re: B.S (0)

Anonymous Coward | about a year ago | (#44040125)

GP means it's pointless to make the reminder.

The likes of Al Capone are supposed to have large money laundry operations to make their income look clean, so they decided it's easier to catch Al Capone for tax evasion; in a sense it's actually wise for a mob boss to pay tax. The little guy drug dealer, on the other hand, just won't bother if his purpose is not to get caught...

Re: B.S (1)

h4rr4r (612664) | about a year ago | (#44040173)

Paying taxes will not increase his odds of getting caught. The IRS cannot rat you out.

stock market rules and laws? (1)

Joe_Dragon (2206452) | about a year ago | (#44039621)

Bitcoins are like the market.

Battle.net Blizzard has to much control.

Re:B.S (1)

gorzek (647352) | about a year ago | (#44040109)

This is a lot easier than you think it is.

If you hold Bitcoins, they have no cash value, and thus are not taxable. If you cash them out into USD (or any other official currency), that is taxable income--or capital gains. That part is not clear, but you'd have to pay taxes on it either way.

If someone duped D3 gold and managed to cash it out to the tune of $100K, then yes, they would have to pay taxes on that. Income is income.

Turnabout (1)

Cid Highwind (9258) | about a year ago | (#44039573)

So, if WoW gold is taxable revenue, that means depreciation of your gaming PC and MMO subscription fees become deductible business expenses, right? That should offset any added tax liability nicely.

only if you sell the gold?? and there are limmts (1)

Joe_Dragon (2206452) | about a year ago | (#44039687)

only if you sell the gold?? and there are limits to the deductible business expenses.

and if the IRS wants to be real dicks they can say in game stuff that you have costs $1M + usd so pay up now.

Re:Turnabout (1)

alexander_686 (957440) | about a year ago | (#44039775)

I would look up the IRS’s “hobby” rules before I start deducting anything.

The example the IRS gives is dog breading. Real dog breeders can deduct subscriptions to dog magazines, cars, housing, dog food, travel to dog shows, etc. A sat-at-home spouse who takes the family dog to the occasional dog show and even sells a pup or two is not a real breeder and does not get to deduct the family’s SUV.

Re: Turnabout (1)

O('_')O_Bush (1162487) | about a year ago | (#44040253)

That cuts both ways though right? Someone selling a couple pups isn't obligated to pay taxes on that hobby any more than someone having a yard sale, since, if it is just a hobby (not a source of income where deductions can be taken)?

How would that be much different than someone selling some of their game currency, unless it is filed as a part-time job, at which point it would no longer be a hobby.

EVE Players (1)

maroberts (15852) | about a year ago | (#44039575)

Should make sure their corporations are domiciled in a star system with a low rate of Corporation Tax

Re:EVE Players (1)

Chris Mattern (191822) | about a year ago | (#44039719)

Eve's corporation tax isn't the tax the star system charges the corp, it's the tax the corp charges its members.

Here ya go! (0)

Anonymous Coward | about a year ago | (#44039583)

Here, have a half million ISK. That should cover it.

Does this mean I can pay my income tax with virtual currency as well?

Re:Here ya go! (1)

Joe_Dragon (2206452) | about a year ago | (#44039723)

Does this mean I can pay my income tax with virtual currency as well?

yes you can with the chase online virtual currency bank. Only $20 /mo + $1 per transaction (up to $1000) and then 00.8% of transaction after that. Income tax payments are billed as cash advance and come with our cash advance fees.

Re:Here ya go! (1)

PPH (736903) | about a year ago | (#44039791)

US Income taxes must be paid with US currency. This is what gives US (or any other nations') currencies their value. If you can pay in any currency, you would use the most efficient one. But if you must pay in a certain currency, then you have to get hold of some of that.

Re:Here ya go! (1)

Rockoon (1252108) | about a year ago | (#44040223)

Exactly.. when Germany joined the Eurozone, adoption of the Euro amongst the people was extremely low...

The solution was for the german government to demand that taxes be paid in Euro's... in one year the use of the Euro went from low percentages to high percentages.

Obligatory (0)

K. S. Kyosuke (729550) | about a year ago | (#44039595)

Three things are certain:

Death, taxes, and Bitcoin crash.

Go buy some more gold.

Re:Obligatory (1)

Technician (215283) | about a year ago | (#44039639)

I wonder if I can offset my income with the loss of my Neopoints when I closed the account?

Nobody seems to get this (3, Informative)

sunami (751539) | about a year ago | (#44039629)

It's taxes on transactions involving dollars only. If you buy WoW gold by selling in-game items, there's no expectation of taxation. If you buy WoW gold with dollars, there's a legit reason to tax that transaction.

Re:Nobody seems to get this (1)

alexander_686 (957440) | about a year ago | (#44039865)

No, it has nothing to do with dollars.

There have been companies that paid with script, barter, coupons, barter coupons, etc.

If you trade one thing for another you have to pay taxes on the real economic value. You can’t avoid taxes by moving to an artificial currency.

The big difference is between “garage sale” transactions that fall into the hobby category,

Re:Nobody seems to get this (0)

Anonymous Coward | about a year ago | (#44039881)

It's taxes on transactions involving dollars only. If you buy WoW gold by selling in-game items, there's no expectation of taxation. If you buy WoW gold with dollars, there's a legit reason to tax that transaction.

It's not quite as simple as that. You can have taxes on business profit even if it is not yet realised in cash - for example you may have done profitable deals just before year-end but the customer is not due to pay until a point in the next year. A US person also can't avoid US taxes by only doing business by barter or in other currencies, whether that means a foreign currency like the Euro or an in-game currency such as WoW gold.

The issue would be whether an in-game 'gain' corresponds to a real-world 'gain'. For most games the answer would be no, but if there is a liquid market so that in-game 'gains' can be reliably realised as money in the real-world, the answer is not so clear cut. Of course, in almost all cases we are talking about trivial amounts.

Ebay Bucks? (1)

buck-yar (164658) | about a year ago | (#44039685)

Are ebay bucks taxable under income?

Re:Ebay Bucks? (1)

ArcadeMan (2766669) | about a year ago | (#44039801)

eBay bucks? What?

Re:Ebay Bucks? (1)

stepdown (1352479) | about a year ago | (#44039815)

In the UK at least, unless you are an eBay seller by trade the transaction would fall under capital gains rules.

Re:Ebay Bucks? (1)

Anonymous Coward | about a year ago | (#44040229)

No, they're like credit card reward points. They're considered a refund, and since it's a return of money you were already taxed on (vs. additional income), they're not taxable.

Caveat: Bonus reward points not attached to specific spending, like the $100 back after you open an account and use it for three months or something, are considered taxable.

so how would you pay? (1)

lunatick (32698) | about a year ago | (#44039731)

If mining gold in MMORPG's becomes taxable then would you be able to pay in the currency of the game? Will you be able to pay in bitcoins for bitcoin mining?
Is there anything that the US Government won't try to tax?

Kill the Gold sellers... (1)

jythie (914043) | about a year ago | (#44039781)

For the in-game currencies (WoW, EvE, etc), their value as far as the IRS is concerned is pegged to how much it sells for online. Thus if we end up paying taxes on in-game currencies it wil be because of the people who sell it out of game and thus associate a fiat currency value to it.

Re:Kill the Gold sellers... (1)

skinfaxi (212627) | about a year ago | (#44039853)

Could they tax you for owning virtual currency that is against the game's ToS to sell for real money in the first place?

Re:Kill the Gold sellers... (1)

Joe_Dragon (2206452) | about a year ago | (#44039915)

But there is a official in game store that you can use to sell for real cash.

Government has the only Iwin button :( (1)

Impy the Impiuos Imp (442658) | about a year ago | (#44039821)

Senator: What good is this "electricity"?

Engineer: Sir, in 20 years, you'll be taxing it.

You were warned. It's only a matter of time before auction house trades are considered sales, because the virtual iyems can be converted to real-world cash by black market, and, increasingly, official cash conversion markets.

Remember: Government is voracious for cash to buy votes ladeling it out. Their only calculus is, "Will I get more votes than I lose doing this?". End of story.

that's bullshit (0)

slashmydots (2189826) | about a year ago | (#44039869)

Bitcoins are literally spontaneously created out of nowhere at a rate of 25 per 10 minutes. If you're mining them, you're not getting paid by anyone. How can they tax something like that? That's ridiculous. With capital gains, you're getting the money from someone or something. Money randomly appearing is a different story. I could see the pool system being seen as compensation for work done but if you're solo mining, I still think it's not taxable under any current tax code.

Re:that's bullshit (0)

Anonymous Coward | about a year ago | (#44039993)

If you think bitcoins are money that come out of thin air, you don't understand what money is.

Seems like crossing a line (1)

erroneus (253617) | about a year ago | (#44039935)

If I were to do business in Japan and moved money in and out of a Japanese account for my business in Japan, does the IRS have the right to tax my business in Japan?

The IRS taxes on US business activity... in US currency. Not sure I agree with the IRS getting involved with something like this especially since I think they really don't understand what they are getting involved in.

http://projectcontrolgroups.blogspot.com/ (-1)

Anonymous Coward | about a year ago | (#44039937)

http://projectcontrolgroups.blogspot.com/

All Money is an Illusion (0)

Anonymous Coward | about a year ago | (#44039955)

Your 1s and 0s are as taxable as your "real" money. Common denominator: they're both an illusion and used to control you.

Because THIS is the root of the financial problem (1)

Gothmolly (148874) | about a year ago | (#44039965)

Not that we spend more than we take in, or could possibly take in. No, it's people swapping WoW-bucks or Bitcoins or pesos or whatever that destabilize the bloated welfare states of the West.

Virtual campaign ... (0)

Anonymous Coward | about a year ago | (#44040025)

... in WoW to behead all tax collectors is under way. Shall we extend this to the real world?

Obviously (1)

gr8_phk (621180) | about a year ago | (#44040061)

One should pay these new taxes in virtual currency. Otherwise the government must establish an official means of determining an exchange rate which in turn legitimizes the virtual currency.

Dear US gov't supporting terrorists in Syria and (0)

Anonymous Coward | about a year ago | (#44040163)

elsewhere with out tax revenues. Let me show you our middle finger.

Hobby Income (2)

ilikenwf (1139495) | about a year ago | (#44040187)

Up to $12,000 or so you can consider it hobby income, as long as you can prove you're in it more for the curiosity/hobby of it.
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