DO YOU OWN BITCOINS or VIRTUAL CURRENCIES (The ones you get for playing multi-player games online)? GET READY, NOW YOU MAY HAVE TO PAY TAX ON IT... A new report from the Government Accountability Office recommended that the IRS develop additional guidance to reduce the tax compliance risks of virtual economies and currencies, such as the type used in online multiplayer games. The GAO report noted that transactions within virtual economies or using virtual currencies could produce taxable income in various ways, depending on the facts and circumstances of each transaction. For example, transactions within a so-called “closed-flow” virtual currency system do not produce taxable income because a virtual currency can be used only to purchase virtual goods or services. An example of a closed-flow transaction is the purchase of items to use within an online game. In an “open flow” system, a taxpayer who receives virtual currency as payment for real goods or services may have earned taxable income since the virtual currency can be exchanged for real goods or services or readily exchanged for government-issued currency, such as U.S. dollars. “Virtual economies and currencies pose various tax compliance risks, but the extent of actual tax noncompliance is unknown,” said the GAO. “Some identified risks include taxpayers not being aware that income earned through virtual economies or currencies is taxable or not knowing how to calculate such income. Because of the limited reliable data available on their size, it is difficult to determine how significant virtual economy and currency markets may be or how much tax revenue is at risk through their usage. Some experts with whom we spoke indicated a potential for growth in the use of virtual currencies.” STAY TUNED FOR MORE... **Source: accountingtoday
Posted on: Tue, 18 Jun 2013 17:11:51 +0000
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