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Do we have to report Mahalo tips to the IRS? If so, when? Only if we cash out and turn them into real money?
Not that I care about the $6, but I'm curious about the nature of virtual money, especially if there exists some kind of cash-out or exchange mechanism. What if there was an informal exchange, possibly one that violated the terms of service? (i.e., if you could buy or sell your earnings in an MMO, but the provider said you were not supposed to do so?)
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@djscram +++ I'm NOT an accountant, so you should talk to your accountant about all your financial issues. +++
Mahalo Dollars have no value until they are turned into cash. In fact, they are absolutely worthless!!! We license these virtual assets to folks and can cancel the program at any time without explanation or a reason (plus all kind of legal protections you can read about in the TOS... terms of service).
As such, it is only until you cash out that you've *earned* something that is of cash value.
Folks who cash out are going to probably need to give us their social security number and fill out a 10-99/other tax forms. We're looking into that now.
So, once you've cashed out I highly recommend paying your taxes... we live in a great country and we're blessed to be able to give Uncle Sam his piece. :-)
Mahalo Dollars have no value until they are turned into cash. In fact, they are absolutely worthless!!! We license these virtual assets to folks and can cancel the program at any time without explanation or a reason (plus all kind of legal protections you can read about in the TOS... terms of service).
As such, it is only until you cash out that you've *earned* something that is of cash value.
Folks who cash out are going to probably need to give us their social security number and fill out a 10-99/other tax forms. We're looking into that now.
So, once you've cashed out I highly recommend paying your taxes... we live in a great country and we're blessed to be able to give Uncle Sam his piece. :-)
If I could pay the IRS in M$, that would be peachy!
Good question and tough to have a discussion about it since the IRS probably doesn't participate in Mahalo Answers. I guess the same question can be applied to Cafepress, Spreadshirt and other places where you choose to cash out. I think you can make like $600 of misc. earnings before you need to claim it. Perhaps it is only in NH where there is no income tax.
You only have to report money collected to the IRS when you collect it.
If mahalo has your social security number (which it doesn't) they would report your earning to the IRS, but that isn't the current system, paypal is the same deal.
If you earn a significant amount through Mahalo tips (>$1,000) in my head you might consider declaring it, but really why would you want to give the gov't any extra money?
If mahalo has your social security number (which it doesn't) they would report your earning to the IRS, but that isn't the current system, paypal is the same deal.
If you earn a significant amount through Mahalo tips (>$1,000) in my head you might consider declaring it, but really why would you want to give the gov't any extra money?
NOT an accountant.
But I did remember reading something about this when reading about Amazon Mechanical Turk (a service in which you perform small tasks for small fees). And I found this forum post that explains that you need to report it if you reach a threshold of $400 http://turkers.proboards80.com/index.cgi?action=display&board;=general&thread;=3524&page;=2#46851
The Mechanical Turk TOS specifies that you can request the 1099 form from Amazon for that purpose https://www.mturk.com/mturk/conditionsofuse (ctrl f irs)
On this Salon article it says $600 (ctrl f tax) http://www.salon.com/tech/feature/2006/07/24/turks/index1.html
And of course, you need to check what your state law says about it.
In other words, consult an accountant.
But I did remember reading something about this when reading about Amazon Mechanical Turk (a service in which you perform small tasks for small fees). And I found this forum post that explains that you need to report it if you reach a threshold of $400 http://turkers.proboards80.com/index.cgi?action=display&board;=general&thread;=3524&page;=2#46851
The Mechanical Turk TOS specifies that you can request the 1099 form from Amazon for that purpose https://www.mturk.com/mturk/conditionsofuse (ctrl f irs)
On this Salon article it says $600 (ctrl f tax) http://www.salon.com/tech/feature/2006/07/24/turks/index1.html
And of course, you need to check what your state law says about it.
In other words, consult an accountant.
Mahalo tips will be handled like any other side income, like babysitting, fixing someone's computer, etc. Only once you actually receive cash, you would file it would under additional income, 1099-MISC.
What if you live in, say Grand Cayman? A foreigner working in the USA has to pay taxes, but what if you are doing the work while actually being in some other country? And the people giving the tips could be in yet another country or countries? How does that work? Does Mahalo have a team of international tax lawyers to help?
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We have to be VERY upfront with folks about that... just like World of Warcraft, Second Life and others virtual currency companies are. In fact, I think we're the only one that allows a cash out (at least directly from the company not a black market!).
Our goal is to grow Mahalo and Mahalo Answers into one of the top 10 most popular websites in the world.... so, there is no plan to cancel anything.
They will be able to extract their M$ won't they?
Plenty of other sites allow that, so there must be a way. So don't design a system that only works for people who can give US social security numbers.
Anyway, if there is a restriction, it should be made very clear when people sign up.