Can the IRS tax virtual money?

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Author's Note: Can the IRS tax virtual money?

The controversy over Bitcoin seems a little irrelevant to the lives of most Americans. What's the likelihood that any of us are going to be buying our groceries or paying our rent with bitcoins anytime soon? What's more interesting is that most of us earn and spend real money as if it's a virtual currency. When was the last time you were paid in cash for doing a job? And how often do you pay with actual dollar bills in a store? Most people I know are paid through direct deposit --or at least a check -- and just about every store and service accepts credit cards. And then there's online shopping; Americans will spend more than $260 billion through Web retailers in 2013, 13 percent higher than 2012. Every day, billions of dollars changes hands in America, but almost all of it is electronic -- 1s and 0s zipping from one virtual bank account to another. How much of a difference is there, really, between a "virtual" dollar and an ingot of "World of Warcraft" gold?

Related Links


  • Chamberlain, Andrew. "Taxing the Video Game Economy." The Tax Foundation: Tax Policy Blog. Jan. 10, 2006.
  • Caron, Paul. "Can the IRS Tax Virtual Profits in On-Line Gaming?" TaxProf Blog. Jan. 10, 2006. (Aug. 28, 2013).
  • Caron, Paul. "JEC Warns IRS: Do Not Tax Virtual Economies." TaxProf Blog. Oct. 19, 2006. (Aug. 28, 2013).
  • Dibbell, Julian. "Dragon Slayers or Tax Evaders." Legal Affairs. January/February 2006. (Aug. 27, 2013).
  • Leonard, Andrew. "Bitcoin tax time?" Salon. June 19, 2013 (Aug. 22, 2013)
  • Reuters. "US Congress launches probe into virtual economies." Oct. 15, 2006.
  • Terdiman, Daniel. "Are virtual assets taxable?" CNET News. Jan. 17, 2006. (Aug. 27, 2013).
  • Terdiman, Daniel. "IRS taxation of online game virtual assets inevitable." CNET News. Dec. 3, 2006.
  • U.S. Government Accountability Office. "Virtual Economies and Currencies: Additional IRS Guidance Could Reduce Tax Compliance Risks." May 2013 (Aug. 22, 2013)