Comments on: Real Taxes on Virtual Assets? http://blog.jparkhill.com/2006/10/30/real-taxes-on-virtual-assets/ Business and Legal Notes, mostly Wed, 31 Mar 2010 15:12:39 -0700 http://wordpress.org/?v=2.9.2 hourly 1 By: Jay Parkhill http://blog.jparkhill.com/2006/10/30/real-taxes-on-virtual-assets/comment-page-1/#comment-21 Jay Parkhill Sat, 03 Feb 2007 01:56:36 +0000 http://www.jparkhill.com/wordpress/2006/10/30/real-taxes-on-virtual-assets/#comment-21 It's a good point- the mechanism for assesing taxable virtual income is not at all clear (hence the 1099 nightmare scenario desribed in my post). In the end, all taxes are self-reported with the threat of audit and penalties keeping most people honest. It may end up a situation similar to reporting of tips by restaurant waitstaff, or any of the other myriad kinds of "on the side" income that go unreported each year: those who derive substantial income from virtual commerce will need to report it, and lots of others can "skate" with relative impunity. It’s a good point- the mechanism for assesing taxable virtual income is not at all clear (hence the 1099 nightmare scenario desribed in my post). In the end, all taxes are self-reported with the threat of audit and penalties keeping most people honest.
It may end up a situation similar to reporting of tips by restaurant waitstaff, or any of the other myriad kinds of “on the side” income that go unreported each year: those who derive substantial income from virtual commerce will need to report it, and lots of others can “skate” with relative impunity.

]]> By: Gene Turnbow http://blog.jparkhill.com/2006/10/30/real-taxes-on-virtual-assets/comment-page-1/#comment-20 Gene Turnbow Thu, 01 Feb 2007 16:34:02 +0000 http://www.jparkhill.com/wordpress/2006/10/30/real-taxes-on-virtual-assets/#comment-20 Frankly, the idea of the federal government trying to climb into all these online virtual economies and trying to sort out, game point by game point, which ones are Americans and which aren't and then try to tax the users on them is really pretty silly. Yes, these virtual currencies do have many attributes of real ones, but there is nothing to be gained in such an effort. For example, some of the characters in these games don't even have humans operating them. They're just part of the game. Is the IRS going to try to tax computer programs now? These sorts of announcements are made to keep attention-hungry politicians in the news, and are repeated over and over by the media because they boost subscription rates and attract eyeballs. One must keep this in mind when parroting them back to the public, which often views such off-the-wall musings as a presentation of fact or imminent financial peril. Frankly, the idea of the federal government trying to climb into all these online virtual economies and trying to sort out, game point by game point, which ones are Americans and which aren’t and then try to tax the users on them is really pretty silly.

Yes, these virtual currencies do have many attributes of real ones, but there is nothing to be gained in such an effort. For example, some of the characters in these games don’t even have humans operating them. They’re just part of the game. Is the IRS going to try to tax computer programs now?

These sorts of announcements are made to keep attention-hungry politicians in the news, and are repeated over and over by the media because they boost subscription rates and attract eyeballs. One must keep this in mind when parroting them back to the public, which often views such off-the-wall musings as a presentation of fact or imminent financial peril.

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