What began as a little known digital currency has quickly swept the world and is now making the move into a more mainstream currency as more employees make the decision to accept bitcoin payments.
Overstock, the first large retailer in the United States to accept bitcoin payments, also recently became one of the first employers to provide employees with the option of being paid in bitcoin. International Business Times reports that the online retailer has plans underway to implement a revolutionary bonus plan for employees to encourage workers to accept bitcoin rather than cash as incentives. 1 Recently, Overstock's sales in bitcoin exceeded the $2 million threshold. A representative of the retailer stated that employees who elect to receive the bitcoin bonus would receive a premium beyond what they would have received if they had opted for cash instead. The new plan involves gradual implementation, with the first step calling for employees to be offered their annual bonuses in bitcoin. Those bonuses will be paid out during Q1 2015. Based on the plan's acceptance, Overstock may consider making regular payroll available in bitcoin.
The Wall Street Journal reports that a majority of professionals in the technology industry would welcome payments in bitcoin. According to a recent survey conducted by Tech in Motion, 51.12 percent of respondents responded that they would be interested in being paid for their work in cryptocurrencies such as bitcoin. Another 18 percent of respondents expressed interest in bitcoin payments in another year or so, indicating that many people are interested but are still sitting on the sidelines and waiting to see where the digital currency goes before they are willing to jump in and participate.
Canadian companies have already begun to pay employees in bitcoin. Earlier in the year, a Canadian payroll firm reported that as many as ten companies had signed up to have their payroll paid in bitcoin. The firm added the option last fall and was overwhelmed by the immediate response they received. In addition to Canadian firms, Wagepoint has also received interest from firms in the United States, where the firm operates a branch office. Most of the firms that have signed up for the bitcoin payroll service are technology companies. With the service, employees may choose to receive all are part of their wages in BTC. Any equivalent taxes are taken first from the Canadian dollar salary prior to any conversions being made on the remaining balance. The Canada Revenue Agency mandates that any taxes payable must be paid in Canadian dollars.
In possible preparation for more workers accepting bitcoin as payment for wages, Australia recently announced bitcoin tax rules. The Australian Tax Office reports that transactions involving cryptocurrencies, including bitcoin, will be viewed as similar to a barter arrangement and similar tax consequences will apply. The ATO further clarified that bitcoin is considered an asset in terms of capital gains tax purposes.
More widespread acceptance of bitcoin as a payroll option is viewed as a necessary step by proponents of the digital currency to adoption of bitcoin in the future. While the ability to acquire and spend bitcoin has become easier in the last year, the process remains encumbered. This is largely due to the struggle experienced by brokers and exchanges in establishing relationships with traditional banks. The expansion of bitcoin salary payments would serve to pave the way for consumers to acquire and begin using the cryptocurrency in a more efficient manner.
Employees who remain uncertain about accepting bitcoin as payment will find that the cryptocurrency does offer a number of advantages not provided by traditional payment options. Among the primary reasons that many advocates of bitcoin value this payment option is that bitcoin offers no bank or transaction fees for acceptance. Bitcoin payment transactions also offer the benefit of being made anonymously and instantly without the need to go through a third-party bank.
In considering whether to accept bitcoin as a form of payment, employees must weight all of the factors. At one time, bitcoin transactions were not subject to tax since the cryptocurrency is not issued by any government. That has since changed, at least in the United States. The IRS recently ruled that bitcoin is taxable property, although it is not a currency.
CNN Money reports that payments with a minimum value of $600 made with bitcoins will be taxed by the IRS in the same way that property transactions are treated. 2 The notice issued by the IRS indicates that such payments will include payments made by bitcoins as well as any gains that are realized by investing in bitcoin, and income derived by producing bitcoin, such as income from mining.
In order for employees to jump on board and begin accepting bitcoin as payment for wages, they will first need to create an account with a bitcoin merchant solution. Such exchanges make it possible to convert bitcoins to US dollars as well as other currencies. A nominal fee is charged for the service.
1) IB Times UK. Bitcoin-Friendly Overstock to Introduce Digital Currency Bonus Scheme for Employees.
2) CNN Money. IRS says Bitcoin is taxable.