Haynes and Boone Blogs » tax

IRS Issues Guidance Regarding Medicare Tax Effective January 1, 2013

Haynes and Boone Benefits Group — Wed, 18 Jul 2012 13:00:52 +0000

Effective January 1, 2013, employers must withhold an additional Medicare tax of 0.9% from the wages of employees who earn $200,000 or more. The IRS issued Frequently Asked Questions (FAQs) to help employers implement this new tax. The FAQs state that the employer must withhold the additional tax beginning with the pay period in which it pays wages in excess of $200,000 to an employee. The tax applies only to the wages over the $200,000 threshold. There is no requirement to notify employees once the employer begins withholding the additional tax and there is no employer contribution required with respect to the tax. The IRS plans to release revised Forms 941, 943 and the tax return schemas for the Form 94X series of returns. The IRS’ FAQs can be found here.

IRS Eases Rules for Deduction of Employee Bonuses

Haynes and Boone Benefits Group — Fri, 18 Nov 2011 15:00:38 +0000

The Internal Revenue Service recently released a Revenue Ruling allowing an employer using an accrual method of accounting for income tax purposes to take a deduction in the current year for a fixed total amount of bonuses payable to a group of employees, even though the employer does not know which of the employees will receive a bonus or the amount of any particular bonus until after the end of the taxable year. A current year deduction is allowed where the total amount of the bonuses is determinable through either (1) a formula that is fixed prior to the end of the taxable year, or (2) other corporate action made before the end of the taxable year that fixes the bonuses payable to the employees as a group. The Revenue Ruling is available here.

Health Coverage Tax Credit Increased

Haynes and Boone Benefits Group — Fri, 11 Nov 2011 14:00:13 +0000

The Trade Adjustment Assistance Extension Act of 2011 increased the health coverage tax credit (HCTC) that is generally available to eligible individuals under the Trade Adjustment Assistance Program and the Alternative Trade Adjustment Assistance Program. As amended, the HCTC allows a taxpayer to take a credit equal to 72.5 percent of the amount paid by the taxpayer for coverage of the taxpayer and family members under qualified health insurance during the taxable year. The increased credit applies to all coverage months beginning after February 12, 2011. A copy of the Trade Adjustment Assistance Extension Act of 2011 is available here.

>UK Looking To Offer Tax Incentives for the Gaming Industry

Andy Ehmke — Wed, 24 Mar 2010 18:17:00 +0000

>In the Economic and Fiscal Strategy Report and Financial Statement and Budget Report issued today by the Chancellor of the Exchequer for the United Kingdom, one of the key strategy points raised in conjunction with the overall fiscal strategy of the United Kingdom was to introduce “tax relief for the UK’s video games industry.”

Recognition at the highest levels of government of the financial impact of the video game industry — it truly is becoming a Gamer’s World.

>Korea Inches Closer to Virtual Currency

Gavin George — Wed, 20 Jan 2010 17:23:00 +0000

>We’ve previously discussed here on the blog the increasing interplay between virtual assets and real-world money. In the coming years, the waves of government regulation and legal action will continue to build amplitude as the virtual assets created within virtual worlds become more easily and profitably converted to real world money. With virtual worlds growing in size and the online gaming player population booming, the development of the law in this area will have wide-reaching ramifications.

The Supreme Court of Korea marked its involvement on Sunday, ruling that virtual currency used in online games may be exchanged for real-world cash.

The ruling was the result of the acquittal of two gamers, who were originally charged with violating a Korean law targeted at online gambling, which banned the exchange of virtual currency for hard currency. The gamers were accused under the law with selling virtual currency know as “Aden” from a game known as Lineage. The Korean Supreme Court held that trading virtual currency for cash should be punished only in cases where it is obtained by online gambling, such as poker or a lottery.

The decision to allow the trading of virtual assets for cash raises the scepter of government regulation of virtual currency exchanges, and of increased scrutiny for the game developers and third party facilitators that run these exchanges. A Korean court ruled in September of last year that profits from the trading of virtual assets should be subject to 10 percent value added tax. As the legal landscape around virtual assets and real world money continues to take shape, don’t be surprised if, in the near future, gamers will be considering the legality and tax implications of buying or selling their extra loot.

>Makin’ $$ in a Virtual World

Haynes and Boone Administrator — Tue, 07 Apr 2009 22:03:00 +0000

>Second Life continues to increase its “mainstream” presence. This article from CNN.com explains how musicians have created careers for themselves in Second Life, illustrating with the example of a single mother who has earned $10,000 through her performances. Further, her performances are arranged by her Second Life booking agent.

Although this article does not itself explore the various legal aspects presented by Second Life, here the interactions so closely parallel traditional “real world” arrangements, they are readily apparent: tax implications for the artist’s income based on tips; the contractual relationship, if any, between the artist and her booking agent; potential copyright issues with the artists music as it is streamed to her audience, etc.

All this is particularly interesting considering the artist, her agent, and the audience members are essentially anonymous, even as they interact. Further, one entering a virtual world such as Second Life should consider what court, if any, has jurisdiction over these legal issues. Presumably the court where either the musician or booking agent is physically located, for example, would have jurisdiction. Other considerations include which state’s (assuming United States) law would govern. Does it matter that the parties would not know the governing law at the time of the transaction? (That the law be known is an underlying principle of any society based on rule of law.) All of the above are points to consider as virtual interactions become more a part of our everyday lives and people and companies enter these worlds to do business.