Virtual currency income (NOT cryptocurrency)

[JWolf]

I've looked over the FAQ and threads about virtual currency, but I don't know if they apply for me. I make money from the virtual world Second Life.

I sell products in Second Life, and convert that virtual currency to dollars. There is some confusion about how I should report this properly. I convert from virtual currency to dollars and withdraw about once a month.

Both their documentation and Paypal documentation says I will get a 1099 if I go over both a $20K/200 transaction limit. But, since I only withdraw about 10 times a year, I never break the transaction limit even though I have broken the $20K limit.

In the virtual world, I may be selling thousands of virtual items, but in the real world, it only counts the transfers to PayPal.

In the past, i have reported it as hobby income, because it was not my primary source of income.

How should I report it if I don't get a 1099K and it is my primary income now? Since I am otherwise unemployed, is it still hobby income?

[MarilynG1]

Since your hobby has become your main source of income, report it as Self-Employment Income on Schedule C.

You don't need a 1099-Misc or other document to report this income.  Your PayPal account statements can be used for income documentation.  Keep records of related expenses. 

Click this link for detailed info on Self Employment Income & Expenses.