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Beginning in 2007, the Electronic Business and Emerging Issues (EBEI) policy group of the Internal Revenue Service (IRS) identified and surveyed internal and external information sources, gathered data on the industry, and collected trend information, among other efforts. EBEI determined that virtual economies presented opportunities for income underreporting and developed (1) a potential compliance strategy, including initiating a compliance improvement project to gather research data and analyze compliance trends, and (2) a potential action plan for specific compliance activities. According to IRS compliance officials, IRS ultimately decided not to pursue these actions in light of available IRS resources and other higher priority needs. Also, IRS did not find strong evidence of the potential for tax noncompliance related to virtual economies, such as the number of U.S. taxpayers involved in such activity or the amount of federal tax revenue at risk.
However, in November 2009, based on EBEI having determined the need, IRS posted information on its website on the tax consequences of virtual economy transactions. The web page points out that, in general, taxpayers can receive income in the form of money, property, or services from a virtual economy, and that if taxpayers receive more income than they spend, they may be required to report their gains as taxable income. The page further states that IRS has provided guidance on the tax treatment of issues similar to online gaming activities, including bartering, gambling, business, and hobby income, and provides links to IRS publications on those topics.