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Can My Employer Pay Me In Bitcoin?

Can My Employer Pay Me In Bitcoin?

The IRS has already paved the way for employers to pay wages using bitcoin and other cryptocurrencies, and more services to facilitate this activity are being established.

If your employer is willing to facilitate it, you can indeed receive your paycheck, or part of it, in bitcoins. Several financial services companies that deal in bitcoins exist that can help you accomplish this, and there will likely be more of them in the future. One such company, Bitwage, acts as an intermediary between your payroll service and Bitcoin exchanges, such as Coinbase, before sending the balance to your Bitcoin Wallet. The IRS has already established guidance on the subject. As an employer, you are free to pay employees in bitcoin and other “convertible virtual currencies” as long as you adhere to the same withholding and reporting requirements that would pertain to employee remunerations in US dollars, including FICA taxes and the rest of it.

For every such transaction, the employer must report the fair market value of the bitcoin payments as USD on the date of the ledger entry. So as far as the IRS is concerned, all of this still happens in USD, and you are free to convert it to bitcoin if that is your preference. If you pay someone an amount over $600 USD for goods or services, you may be required to document and report that transaction as well. If you pay yourself as a self-employed person or simply by making money with bitcoin outside of your regular employment, you may be required to withhold self-employment taxes and to report self-employment income per federal guidelines. After you have received such income payments, you have established your cost basis for the bitcoins if you then choose to hold them as an investment rather than use them as currency. If the value of your bitcoins drops significantly by the end of the year, or in future years, you may be able to deduct some losses.

Cryptocurrencies are treated as property by the IRS, following their standard guidelines for property taxation. The IRS calls cryptocurrencies “convertible virtual currencies,” meaning that they are not considered “real” currency, but are a digital property that can be converted into real currency. Other countries, like Germany, may treat bitcoin as foreign currency rather than property, but this is a minor nuance. Other countries have chosen not to regulate Bitcoin transactions so far, which may mean that no reporting is required in some cases.

Keywords: self-employment tax, Coinbase, virtual currency as a capital asset, FICA taxes, Bitwage, Bitcoin income taxes, Bitcoin loss deductions,