FRIHOST FORUMS SEARCH FAQ TOS BLOGS COMPETITIONS
You are invited to Log in or Register a free Frihost Account!


frih$ taxable?





k3hrn
Anyone know if the use of the FRIH$ fall under this part of the IRS rules:

http://www.irs.gov/publications/p525/ar02.html#d0e4606

Quote:
Bartering

Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. If you exchange services with another person and you both have agreed ahead of time as to the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise.

Generally, you report this income on Schedule C or Schedule C-EZ (Form 1040). However, if the barter involves an exchange of something other than services, such as in Example 4 below, you may have to use another form or schedule instead.

Example 1.

You are a self-employed attorney who performs legal services for a client, a small corporation. The corporation gives you shares of its stock as payment for your services. You must include the fair market value of the shares in your income on Schedule C or Schedule C-EZ (Form 1040) in the year you receive them.

Example 2.

You are a self-employed accountant. You and a house painter are members of a barter club. Members get in touch with each other directly and bargain for the value of the services to be performed. In return for accounting services you provided, the house painter painted your home. You must report as your income on Schedule C or Schedule C-EZ (Form 1040) the fair market value of the house painting services you received. The house painter must include in income the fair market value of the accounting services you provided.

Example 3.

You are self-employed and a member of a barter club. The club uses credit units as a means of exchange. It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. The club subtracts credit units from your account when you receive goods or services from other members. You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year.

Example 4.

You own a small apartment building. In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. You must report as rental income on Schedule E (Form 1040) the fair market value of the artwork, and the artist must report as income on Schedule C or Schedule C-EZ (Form 1040) the fair rental value of the apartment.
Form 1099-B from barter exchange. If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by January 31, 2006. It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2005. The IRS will also receive a copy of Form 1099-B.

Backup withholding. The income you receive from bartering generally is not subject to regular income tax withholding. However, backup withholding will apply in certain circumstances to ensure that income tax is collected on this income.

Under backup withholding, the barter exchange must withhold, as income tax, 28% of the income if:

You do not give the barter exchange your taxpayer identification number (generally a social security number or an employer identification number), or

The IRS notifies the barter exchange that you gave it an incorrect identification number.
If you join a barter exchange, you must certify under penalties of perjury that your taxpayer identification number is correct and that you are not subject to backup withholding. If you do not make this certification, backup withholding may begin immediately. The barter exchange will give you a Form W-9, Request for Taxpayer Identification Number and Certification, or a similar form, for you to make this certification.

The barter exchange will withhold tax only up to the amount of any cash paid to you or deposited in your account and any scrip or credit issued to you (and converted to cash).
Bondings
Are you serious or making a joke? Confused

Frih$ is a virtual currency on Frihost and isn't exchangable for real real money (not even allowed to be). You can use it for some features (like directory listing) or in exchange for services of other Frihosters, like avatars/signatures.
k3hrn
Oh, I'm quite serious....

THe IRS might view "You can use it for some features (like directory listing) or in exchange for services of other Frihosters, like avatars/signatures." that folks are using the frih$ insead of money...which they could view as a barter...and thus taxable.

I'm certainly not gonna ask them.
scotty
That made me laugh.

Despite the comedy in it, I do see his point but I guess the IRS doesn't care about the arguably useless result of our 'bartering'.
SpellcasterDX
I seriously doubt the IRS is gonna bother to mess with a virtual currency system on a free hosting service. Rolling Eyes
TeenZine
Damn this is funny. I dont think so. Why would the irs want vertial money its no good ?
k3hrn
TeenZine wrote:
Damn this is funny. I dont think so. Why would the irs want vertial money its no good ?


The IRS might not want the virtual money....but it might want to tax folks for receiving it.

I suspect that a careful reading of the rules might explain the hows and whys.
tidruG
Alright well... if the IRS ever come to Frihost, we'll pay our taxes... of course, it will be in FRIH$. They can either take that and go away or go.... nevermind.
k3hrn
tidruG wrote:
Alright well... if the IRS ever come to Frihost, we'll pay our taxes... of course, it will be in FRIH$. They can either take that and go away or go.... nevermind.


That's an interesting concept....and one that the IRS wouldn't want to see taken to court. I know a person in Florida who is hoping they will do that to him.....he thinks that if he goes to court and the IRS looses, ie the court says he can pay the taxes on his bartering with barter dollars, then there would be a precedence to to that with other debts to the Feds.
Bondings
K3hrn, although the servers are hosted in the USA, I live in Belgium. Wouldn't that make it foreign country and hence not applicable?

Anyway, thousands (if not millions) of online services/websites are using virtual currencies and by my knowledge they never had a problem with it. Wink
rajhank
Damn that was so funny.

I mean there r people out there in the world ready to pull each other's leg.
k3hrn
Bondings wrote:
K3hrn, although the servers are hosted in the USA, I live in Belgium. Wouldn't that make it foreign country and hence not applicable?


I don't think it would apply to you....but it could apply to me, since I am in the US...and technically would have to declare any "income" I received.

Bondings wrote:

Anyway, thousands (if not millions) of online services/websites are using virtual currencies and by my knowledge they never had a problem with it. Wink


Hopefully no one will be involved in a test of the law.
k3hrn
rajhank wrote:
Damn that was so funny.

I mean there r people out there in the world ready to pull each other's leg.


I'd suggest that instead of thinking it a joke, you bring up the IRS regulations. I can tell you that the section on Bartering is the least complicated section of IRS regs.

Of course you can not read it and reach a conclusion....which is kinda like concoluding that the moon is made of green cheese with no evidence to support your position.
sarapicoazul
k3hrn wrote:
I'd suggest that instead of thinking it a joke, you bring up the IRS regulations. I can tell you that the section on Bartering is the least complicated section of IRS regs.


I think you are messing with the devil !
Hobbit
After reading this, I came to the conclusion that, the more you post, the more taxes you have to pay. Bondings avatar should be changed to, "I want you, to pay taxes."
k3hrn
sarapicoazul wrote:
k3hrn wrote:
I'd suggest that instead of thinking it a joke, you bring up the IRS regulations. I can tell you that the section on Bartering is the least complicated section of IRS regs.


I think you are messing with the devil !


DId you read the rules? I doubt it.

Perhaps they are too difficult to comprehend, or written in sone obtuse language?

I was hoping that there would be some serious discussion, or even someone pointing out that the rules aren;t what I said thet were....but apparently that's beyond the scope of this topic.
tidruG
k3hrn,
I honestly don't think you've got anything to worry about. It's just virtual currency. If the IRS had to tax others under the 'barter' system, they'd also have to tax various MMORPG players who barter some resource for power-ups for their characters, wouldn't they?

I'm still not sure if you are required to reveal your online virtual currency as an income to the IRS. Also, what exactly are you bartering with the FRIH$. You're basically going to use it primarily for 'buying' sigs and other website graphics or other website related stuff... most of which you could get a friend to do for you for free anyway.
orcaz
seriously, this is a JOKE. If it is the case, many forums would haf shut down alr. Plus, I don't really know what is the use of frih$. nvr used it b4. I'm more concerned about my points that frih$, as points are the "real currency" you "pay" for this hosting service.
k3hrn
tidruG wrote:
k3hrn,
I honestly don't think you've got anything to worry about.
........

I'm still not sure if you are required to reveal your online virtual currency as an income to the IRS. Also, what exactly are you bartering with the FRIH$. You're basically going to use it primarily for 'buying' sigs and other website graphics or other website related stuff... most of which you could get a friend to do for you for free anyway.


The argument that one uses virtual currency to obtain what one could get for free isn't valid, since one is using virtual currency to aquire a good or service and using the virtual currency in lieu of cash.
k3hrn
orcaz wrote:
seriously, this is a JOKE. If it is the case, many forums would haf shut down alr. Plus, I don't really know what is the use of frih$. nvr used it b4. I'm more concerned about my points that frih$, as points are the "real currency" you "pay" for this hosting service.


THe fact that one uses points to pay for hosting is interesting....the fact that the number of points I have and the umber of frih$ I've accrued hasn't changed for the last 3 or 4 posts I;ve made is also interesting.

Perhaps the point-counting software is broken?
tidruG
There are some forums in which you don't get either points or FRIH$. Maybe you were posting in those forums?
Jokes, Funny Pictures are 2 forums in which you won't get points.
k3hrn
tidruG wrote:
There are some forums in which you don't get either points or FRIH$. Maybe you were posting in those forums?
Jokes, Funny Pictures are 2 forums in which you won't get points.


The problem is here in this forum....I believe this will the fifth message where the system tells me I have earned xx points and yy frih$, yet the total amount doesn't change.

Maybe the IRS is taking the points and $ from me as I am earning them...a lien, so to speak...which makes my totals lean.
Manofgames
perhaps we can slip them a few 100FRI$, and they'll ignore us Very Happy

Or

FREE WEB SPACE FOR THE IRS!!

Even though this doesn't affect me, because I'm not in the US Very Happy
k3hrn
Manofgames wrote:
perhaps we can slip them a few 100FRI$, and they'll ignore us Very Happy


Ho Ho....a FriHost bribe....I love it...that would cause an accounting nightmare for them.

Manofgames wrote:

Or

FREE WEB SPACE FOR THE IRS!!

Even though this doesn't affect me, because I'm not in the US Very Happy


But giving them free web space for virtual dollars would be unfair to all that get it now for posting points....and those who make posts and don;t get their points.
Bondings
k3hrn, I'm not a lawyer and neither do I have any legal knowledge, definately not US laws. I guess this is the same for most people here and that's why you don't get any more concrete replies.
tidruG
Quote:
Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. If you exchange services with another person and you both have agreed ahead of time as to the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise.

What's the fair market value of semi-pro (in most cases) graphics? Or having someone install software for you on your free space?
I honestly think it's nothing, because you could get a friend to do this for you for free... basically, you can get anyone to do this for free for you, provided he knows what he's doing and he has the time.

I can't really think of any other use for FRIH$ which may have any significant market value.
k3hrn
Bondings wrote:
k3hrn, I'm not a lawyer and neither do I have any legal knowledge, definately not US laws. I guess this is the same for most people here and that's why you don't get any more concrete replies.


Perhaps....but not being a lawyer doesn't explain simply dismissing the issue.

Aside from that, is there any explanation for why the points and $ gnerated by at least 5 posts never make it into my totals?
Manofgames
as long as Bondings pays tax on the use on the server, I don't see why there should be a problem, because this is a community that is spread over 20 countries.

You do pay tax on these servers, right Bondings.... Shocked
ninjakannon
There's no discussion here. Think about it, would so many thousands of forums (and websites) use this same (or similar) system for virtual money if it was against any rules, laws, regulations or protocols? No, and there would be no CashMOD for phpbb, because it wouldn't be allowed. Need anyone say any more?

I have no idea why you would even suggest such a thing, k3hrn.

k3hrn wrote:
Aside from that, is there any explanation for why the points and $ gnerated by at least 5 posts never make it into my totals?

Either you're wrong, and you in fact did get the points and FRIH$. OR you've posted in forums here that don't give you any points or FRIH$ for posting in them - there are a few.
Manofgames
yes, but not every forum is offering free webspace are they??
ninjakannon
Manofgames wrote:
yes, but not every forum is offering free webspace are they??

That has no bearing on it at all. Things would be different if you bought the web space for FRIH$, but you don't. The web space and the FRIH$ are completely unrelated features of Frihost and thus there is no question about FRIH$ being taxable or tradable for cash.
Although I would say that if someone wanted to buy someone's FRIH$ then there is a possibility that under certain conditions the buyer would have to be tax on the money used to buy the FRIH$. This could lead to many problems (not to mention arguments) and thus FRIH$ are not to be bought or in any way traded for real cash. Anyway, this is probably against more rules than just the rules of this website.
Bockman
Since i had to get to work on a Sunday, I just got here and read your quote on Barter Exchange... My view on this follows:

If i've read it right, only one of the examples fit's (mildly) on this forums moddus operandis (M.O.), and that's the example case #3.
Quote:
Example 3.

You are self-employed and a member of a barter club. The club uses credit units as a means of exchange. It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. The club subtracts credit units from your account when you receive goods or services from other members. You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year.

As you can see in the end of that example, "You must include in your income the value of the credit units that are added to your account(...)".
Since FRIH$ has no real value and there is no index on the FRIH$-> US$ value, the credit units on Frihost are worth 0$.

Also, reading the bottom of that law, you can find:
Quote:
The barter exchange will withhold tax only up to the amount of any cash paid to you or deposited in your account and any scrip or credit issued to you (and converted to cash).

Since there is no cash whatsoever paid to you and all the "credit" (FRIH$) we give you is unnable to be converted into cash, the barter exchange cannot withhold any tax from the FRIH$ you have received.

Hope this clearly explains tha situation.

Be Well Cool
k3hrn
ninjakannon wrote:
There's no discussion here. Think about it, would so many thousands of forums (and websites) use this same (or similar) system for virtual money if it was against any rules, laws, regulations or protocols? No, and there would be no CashMOD for phpbb, because it wouldn't be allowed. Need anyone say any more?


That's not very logical....consider torrents...using your logic, no one would use that technology to share copywritten material...but it occurs.

ninjakannon wrote:

I have no idea why you would even suggest such a thing, k3hrn.


I posed a question related to IRS regulations....perhaps more careful reading would help.

k3hrn wrote:
Aside from that, is there any explanation for why the points and $ gnerated by at least 5 posts never make it into my totals?

ninjakannon wrote:

Either you're wrong, and you in fact did get the points and FRIH$. OR you've posted in forums here that don't give you any points or FRIH$ for posting in them - there are a few.

Is this one? I doubt it. Could it be possible that you are wrong?
Animal
Quote:
The barter exchange will withhold tax only up to the amount of any cash paid to you or deposited in your account and any scrip or credit issued to you (and converted to cash).

As Bockman has correctly said, the tax law doesn't appear to apply to FRIH$. This thread appears to have become a bit hostile, and it seems to have been answered in any case. I'll -close- it to prevent spam / flaming / fighting etc. Complaints on a postcard as usual Razz
Related topics
One More Question (About Points and FRIH$)
Ill make signatures for FRIH$
20 Frih$
FAQ : Qu'est ce que les 'FRIH$'?
What are Points and FRIH$ for?
want to buy a site banner will pay alot of frih$
Request: Site Graphics... Will pay big FriH$
FriH Points Disappearing
need baner sign avatar for all 100 FRIH$
70 Frih$ Apple Type website Desgin
I am buying a website desgin like Apple.com (75Frih$)
More FRIH$, more space...
I will do anything for frih$ Verry Cheap!
Changements to the Points/frih$ system (Discuss)
This topic is locked: you cannot edit posts or make replies.    Frihost Forum Index -> Support and Web Hosting -> Frihost Support

FRIHOST HOME | FAQ | TOS | ABOUT US | CONTACT US | SITE MAP
© 2005-2011 Frihost, forums powered by phpBB.