Linden Lab Official:Required Tax Documentation FAQ
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Note: For more information, see the following post on the official Second Life blog: Required Tax Documentation. |
The Internal Revenue Service (IRS) requires Linden Lab to collect and retain tax forms from users who reach certain USD process credit transaction volumes and/or amounts. Certain other tax jurisdictions, like US states with income tax, may also require Linden Lab to collect tax information according to their local tax laws. If you're unsure whether or not your location has tax requirements that may apply to you, please contact your tax professional or local tax authority for further information.
How do I know if I need to submit documentation?
If you are required to submit documentation to Linden Lab, we will email you with links to the appropriate forms and instructions on how to submit them. If you do not receive an email from Linden Lab, we do not need you to complete these forms. Tax documentation requests from Linden Lab may also show as originating with Tilia LLC, which manages financial services for Second Life and helps Second Life comply with U.S. laws and regulations. Linden Research, Inc. is a majority owner of Tilia LLC.
If you are concerned that you've received an email requesting tax documentation, and want to confirm that it is in fact a valid request for information from Linden Lab or Tilia related to your Second Life business activity, please contact our Support team for assistance.
If you reach certain USD (US Dollar) credit transaction volumes, the forms you’ll need to submit depend on where you live:
- U.S. residents will need to complete Form W-9
- Non-U.S. residents will need to complete Form W-8BEN (for individuals) and Form W-8BEN-E (for entities, like businesses).
What is a Form W-9? What information will I need to provide?
This form collects the information the IRS requires from US taxpayers.
To complete this form, you will need to provide a TIN (Tax Information Number); in most cases, this is either a Social Security Number (SSN) or an Employer Identification Number (EIN). The IRS website contains more information about how to obtain an EIN here.
What is a Form W-8BEN? What information will I need to provide?
This form collects the information that the IRS needs from non-US residents in order to exempt them from US tax reporting requirements.
If I receive a request for this documentation, how long do I have to complete it? What happens if I don’t provide these forms to Linden Lab?
Please follow the instructions to complete and submit the required Form W-9 or W-8BEN within thirty (30) days of receipt.
If Linden Lab does not receive your completed form within thirty (30) days, your account will temporarily be put on hold until the requested forms are received.
What is IRC Section 6050W, and how do I know if it affects me?
This US tax law requires Linden Lab to report USD (US Dollar) credit transactions which reach certain thresholds in a calendar year.
For the 2023 reporting year, U.S. residents with 200 or more processed credit transactions with a total amount of gross proceeds in excess of US$20,000 in a calendar year, we are required to file a Form 1099-K with the IRS reporting those transactions for that year. We will send you a copy of this form.
If you'd like more information directly from the IRS regarding section 6050W and the 1099-K form, please visit the IRS's official website for the latest information about 1099-Ks: https://www.irs.gov/forms-pubs/about-form-1099-k
What is a Form 1099-K? Why would I receive one from Linden Lab, and when?
This form is used to report to the IRS the gross amounts of reportable process credit transactions in a calendar year. Linden Lab is required to file this form for US residents who reach certain process credit transaction thresholds.
For U.S. residents with 200 or more process credit transactions with a total amount of gross proceeds in excess of US$20,000 in a calendar year, we are required to file a Form 1099-K with the IRS reporting those transactions for that year.
Please note, certain US states may have state income tax thresholds that may apply as well. For more information about state income tax that may apply to you, please contact a tax professional or tax advisor or your state's income tax authorities.
If I have several Second Life accounts that do not meet the thresholds individually, but do so when combined, will my accounts be affected?
Yes. US taxes apply to the individual person, not to individual Second Life avatars. Sorry!
I use PayPal with my Second Life account; why is the information on my Form 1099-K from Linden Lab different from the information on the form I receive from PayPal?
The information on a Form 1099-K you receive from Linden Lab will be based only on the gross amounts of reportable process credit transactions. This is the information we are required to include on the form.
If you use PayPal with your Second Life account and also receive a 1099-K from PayPal, it would include payouts to your account as well as other activity you may have with PayPal.
It is your responsibility to inform the IRS of the profits or losses of your in-world business on IRS Schedule C.
What do if I believe there’s a mistake on the 1099-K that Linden Lab sent me?
Please create a support case at the Support Portal for further assistance.
How do I use the 1099-K for my tax return?
Please contact your tax, legal, or professional advisor for guidance. Tax law and taxes in general are complex and different for every jurisdiction. Linden Lab, Tilia, and Second Life Customer Support cannot provide tax advice that's specific for your needs, and we'd hate to give information that isn't helpful or correct in your individual tax situation.
In the United States, the IRS has a page with resources for tax assistance and finding local tax help that may be useful for you: https://www.irs.gov/help/let-us-help-you
If I have additional questions about the necessary forms, how can I ask them?
Please create a Support ticket to contact our Support team for assistance, and we'll do our best to help. As stated above, Linden Lab, Tilia, and Second Life Customer Support cannot provide tax advice that's specific for your needs, but we'll do our best to answer general questions or help with your concerns if we can.