Now, the Internal Revenue Service (via the GAO's report) is giving taxpayers some ad-hoc, unofficial guidance, complete with hypothetical examples.

• If you're playing a massively multiplayer online game like World of Warcraft (yes, the report actually cites WoW by name) but don't convert your in-game gold to real-life dollars, you haven't made any money and you don't owe any income taxes on your gameplay.
• If you trade virtual goods and services for virtual currency, you "may" have earned income and you have to report it.
• If you trade real-world goods and services for virtual currency, that might also result in taxable income.
• If you earned virtual income (say, by renting out property on SecondLife) and convert those earnings into dollars, you've earned taxable income.
• If you successfully mine a batch of bitcoins, that's taxable income.