Yet more on tax

For the thrilling conclusion to this tale, and the solution to all the problems, see this post. Listen to that post and not to all the mistakes I made before it! ]

Today I spoke with one of the Acceptance Agents mentioned in my previous post about obtaining an ITIN.

The news was not good. I had unfortunately overlooked another roadblock the IRS puts up – you have to convince them that you need an ITIN.

From where I’m sitting my need for one is pretty clear, but not so to the IRS. They will only issue an ITIN if you meet one of a specific set of exceptions. These are listed on page 7 of the Instructions for Form W-7 document. Selling virtual goods is not one of the exceptions – the list of exceptions is decidedly pre-21st century.

The most likely fit from their current list of exceptions is 1(d) – Individuals who are receiving distributions during the current tax year. In order to prove to the IRS that this reason is valid you must provide a signed letter or document from the “witholding agent” (Linden Lab, in our case).

It seems unlikely that LL will provide these letters. They won’t even answer my most basic questions at this point.

So, we reach an impasse. I will contact LL about getting a letter to submit with form W-7 to obtain an ITIN, but I doubt very much that they will help. At this point an ITIN becomes basically unobtainable for non-US citizens who run businesses in SL.

It may be possible to wait a year, pay 30% tax on everything, then file a US tax return asking for the money to be refunded. The need to submit a US tax return is acceptable evidence that you need an ITIN, but you do have to take the 30% hit for a whole year.

This assumes that LL will allow you to cash out at all – still no word on that, by the way. I have asked but the only response is silence.

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