Linden Lab Official:Required Tax Documentation FAQ
|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 L$ sale transaction volumes and/or amounts.
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.
If you reach certain L$ sale 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 boxes 1-5 of part 1 of Form W-8BEN
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; 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. You only need to complete Part I, #1-5 (which does not require an EIN nor an ITIN).
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 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 to the IRS the total amount of money paid to any US resident whose L$ sales transactions reach certain thresholds in a calendar year. For U.S. residents with 200 or more L$ sale transactions with a total amount of gross proceeds in excess of $20,000 in a calendar year, we are required to file a Form 1099-K with the IRS reporting those transactions for that year. We will send you a copy of this form.
What is a Form 1099-K? Why would I receive one from Linden Lab, and when?
This form is used to report to the IRS the gross proceeds earned from L$ sales transactions in a calendar year. Linden Lab is required to file this form for US residents who reach certain transaction thresholds. For U.S. residents with 200 or more L$ sale transactions with a total amount of gross proceeds in excess of $20,000 in a calendar year, we are required to file a Form 1099-K with the IRS reporting those transactions for that year.
If I have several Second Life accounts that do not meet the thresholds individually, but do so when combined, will my accounts be affected?
I use PayPal with my Second Life account; why is the information on my Form 1099-K from Linden Lab different from the information on the form I receive from PayPal?
The information on a Form 1099-K you receive from Linden Lab will be based only on the gross proceeds from the sale of L$. 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?
Create a Case in the Support Portal.
How do I use the 1099-K for my tax return?
Contact your tax, legal, or professional advisor for guidance.
If I have additional questions about the necessary forms, how can I ask them?
Open the request in your Case History in the Support Portal and reply to the Case if you have any related questions.