Unless I've read it completely wrong, I don't believe Blizzard will ever let you retrieve any money from your Blizzard wallet.

Thus, it might exist in the Blizzard-space, but you never actually earn any real money. Therefore, no taxes. For all intents and purposes, the "real money" auction house uses money that doesn't actually exist.

When you buy into the Blizzard wallet, you are effectively gifting them the money in exchange for a proxy currency. It is not a real asset. If Blizzard had to shut down the server, they would owe you nothing.

Last I read you will indeed be able to "cash out" money from the Diablo 3 Cash Auction house.

It's a gray area, so no one knows for sure. I definitely think you do need to report it if you are cashing out and putting it in your bank account. That is income like any other. If that is your only income, I don't think you would have to report it. You won't make enough money through that to pay taxes.

The IRS says you are only required to file taxes if make over $9,500 or something around that. If you have other sources of income though, you definitely could be over that dollar amount. If your regular salary is $25,000 and you make $1000 from Diablo 3, that has to be reported.

I know there are exceptions for things like garage sales where you don't have to report it if under a certain amount. I don't know if that would apply to Diablo 3 trades/auction house.

"The IRS says you are only required to file taxes if make over $9,500 or something around that."

Please cite your source.

This is blatantly incorrect, and I encourage anyone reading to discuss tax information with their accountant.

Being a minor does not stop you from having to file a tax return and possibly pay income tax. Neither does making under $9,500. IIRC, the minimum is about $400, though again I highly recommend consulting with a CPA for tax information and not some random Joe Schmo on the internet.

If you make under $9,500 and over $400 but haven't filed a tax return, the IRS would like to have a word with you about paying some interest and penalties.

@Jon

http://www.irs.gov/individuals/article/0,,id=96623,00.html

If you go through the yes/no stuff:
No special circumstances. (the first page)
Not a dependent.
Single.
Under 65.
Gross income less than $9,500.

"Based on the information provided, you do not need to file a Federal Income Tax return for this year unless you need to receive a refund of payments already made."