Has anyone had to do this? I have not, but am curious in case I ever need to.
If I deposit $600 on 12/1/14 and then withdraw $650 on 1/1/15, (example only), do I have to claim the money on tax return in US? If so, is it $50, or $650? Would I need to amend 2014 return to subtract the $600 from income that year and then claim $650 income 2015?
What if deposits go back several years, but you make one big withdrawal, say the withdrawal is less than total deposits? I imagine a large withdrawal would be flagged to the IRS, but it technically wasn't income, you actually lost money on already taxed revenue, right?
Say you got really lucky and made $10,000 ped one year. Does it count as capital gains? What if it was 100% from CLD/AUDs, is it capital gains then?
(Note, I'm not in any of these positions right now, but I'm sure others have been, so I'm curious.)
Sityl, A moment ago Edit Report
This is a very cloudy area. In the end a lawyer would probably need to be hired to answer it for certain. Accountants and Lawyers very often have conflicting views/rules, especially when it comes to multinational (laws and rules)...and then virtual assets.
There are many sides to it, for one, the company you pay and get a refund from, Mindark, is.... a toy company (for I believe a tax related reason). So in theory, your return is a refund of a toy good already purchased. But, my history of deposits is disappearing...so the refund idea goes with it after 7/10 years of no deposits I would guess (based on backruptcy rules/irs record keeping rules). (MA only keeps deposit records for a couple of years)
Lottery winnings do not need to be reported until 500 dollars in some places...a couple thousand in others. So the 50 bucks excess could be deemed absorb able under that, or it could be labeled as a sweepstakes, or a giveaway, or even an outright gift perhaps? We aren't told how MA clarifies it legally, their interpretation is probably the one with precedence.
Generally though any lottery or gambling winning over the threshold amount (state varied) is accompanied with a tax form provided by the host, and MA has never sent a tax form on withdrawls that I am aware of (meaning they aren't reporting it to the IRS)...so that clouds that logic as well.
It isn't considered earned income, so capital gains would probably be appropriate, but like I say I don't think it technically qualifies as an investment either, more or less a refund on a service provided...unless you truly hit something much bigger than you ever put in....which we know is rare anyhow.
You generally get a form for your capital gains on assets that are marked for such designation. Stock gains, house sales...forms are sent to you. MA sends none, lead me to assume they are not required to for a reason, and that it indicates this is not an asset deemed taxable under capital gains.
Mix these different variables together and you have alot of possible explanations, alot of differing logic, and a ton of accountants and lawyers ready to take your PED to likely not find a definitive answer anyhow.
I personally assume that it is a refund, after which I consider it a gift and whatever is left perhaps a sweepstakes winning. But I am not a professional, and slightly biased on paying taxes on money earned ....the first time, not every time it converts.
If I go to the movies and pay the ticket price, if I ask, they may they give me a refund...not a refund and a tax form. Entropia is entertainment.
I wish I could answer specifically, but in my case, until last year I have been tax exempt, it was not necessary to file until I hit a certain amount, and my withdrawals never exceeded that per year. Kind of ironic that EU is a big reason I will no longer be tax free, withdrawals went into real estate over the years which raised income after a recent consolidation. I actually welcome it though, I am unable to work, so this a position I never thought I would be in again, especially after a few hundred k in medical procedures performed.
From here, I will probably be looking more at the deposit/withdrawl balance sheet and start claiming at profit point, being sure to verify with an accountant. But I havn't gotten there yet so I cant say. One thing is for sure, the IRS is a beast best not crossed.
I am fairly certain, Until your pulling over 5 figures a year out of the game, whatever the tax is, is probably far far lower than the lawyer/accountant billable time to try to answer how the IRS and legal system might interpret it.
Still always best to ask your lawyer/accountant. Capital gains is certainly the safe answer.
I would ask/will be asking next year if there is a way to reclassify from a capital gain rate to a lower rate if at all possible if it does in fact qualify as a gain, but I think technically and legally you would be paying any tax on your refund unnecessarily in a majority of circumstances.
I also am confident that if someone did get slapped for taxes and EU (or second life, or whatever $ RCE game) we would have heard about it by now.
