Ask HN: Accepting Bitcoin for freelance work
I'm a web developer, just starting my freelance career, and I want to know if there are any legal or tax reasons that would prevent me from accepting bitcoin as a form of payment. I've been writing about Bitcoin for a while, so I'd definitely be interested to know where you end up on this. Please get in touch with me if you end up accepting payment in Bitcoin. As for advice: consult your lawyer and accountant. The truth is Bitcoin is a huge grey area. There are some folks who think Bitcoin is an investment vehicle like gold or silver and should be reported as capital gains income. http://qz.com/72637/why-bitcoin-millionaires-could-accidenta... And there are others who would say that because you're using it as a form of payment, you should report it as regular income, probably in the same way you would income earned in a foreign currency. http://www.businessinsider.com/do-you-have-to-pay-taxes-on-b... Either way, you will need to report income in Bitcoin to your country's tax authority in some way or risk prosecution. Again, if you end up pursuing it, I'd be very interested in hearing the story. While I agree that OP should contact an accountant, I completely disagree that Bitcoin is a huge grey area when it comes to income vs capital gains. Bitcoins that are paid to you are regular income. Period. There is absolutely no uncertainty as to whether it is income. Anytime you are straight up given something as payment, that's income. If your employer gives you stock (not stock options), it's income. If someone gave you a car as payment for a job, the value of that car is income. Now, if the value of your bitcoins go up or down after receiving them, then that is a capital gain (or capital loss). The uncertainty lies in how you would price Bitcoin at the time of it being granted to you. What I would advise is collecting (and keeping) documentation (a printout) that shows the market price on MtGox for BTC on the day you receive them. This is in case you ever get audited. There is no need to involve a lawyer - only a (tech-savvy, I hope) accountant is needed. Ultimately, I have no idea why you would prefer BTC to dollars, since it not only exposes you to (a slight) security risk, but it also introduces market volatility where the value of your BTC can swing 50% in a single week. BTC has most certainly not been stable at $120. But that's your choice. I also have no idea why you would bother offering a discount for payment in BTC. Thank you for the links. The first step is to find a client who would pay via Bitcoin, but I figure if businesses can accept Bitcoin then so can I. I will definitely update you if I go through with it. You're quite welcome. Here's another one I found while thinking about your question: http://blog.bitinstant.com/blog/2012/11/12/bitcoin-and-taxes... Good luck, and thanks in advance for keeping in touch. EDIT: Actually, that's not the one I was thinking of, although it's not bad. This is the more informative one: http://www.dailydot.com/business/how-to-declare-bitcoins-tax... Right now the main factor before everything else would be the volatility of BTC. If you have an hourly rate, how do you convert it to BTC considering the values goes up(and down) in solid percentage points and during the course of a single day. So if you're up for the risk, then try it out. But personally i don't see any benefits over just asking for money in USD(or whatever currency) over paypal. I would consider offering a discount of sorts when paying via bitcoin, or setting a fixed conversion rate (right now something like $120 per BTC has been fairly stable). But I agree, there's nothing to prevent me from accepting the money via normal means, and simply buying my own bitcoins. 120$/BTC hasn't been fairly stable. Just a few days ago it was at 70. The government will get their money. Pay now or pay HUGE penalites, fines + years of interest. Anyone who thinks the government wont control this is CRAZY. I am longtime buisnessman and know how the IRS and Government work. Lets not mention going to jail for trying to avoid taxes. I work with multiple currencies in the real world. However the earnings are made, they are always accounted for in the currency of the company. If you publicly acknowledge that you are accepting bitcoin as payment, beware that you will have to account for it's value on the day of the transaction. This means that if a person buys a pair of shoes at $50 and you hadn't adjusted your own exchange rate in line with the market for that date, you could end up recording more $ or less $ for that sale, and you pay tax a % of your profit on that sale. A freelancer however could, in theory, conduct their business entirely out of the public gaze, but that would also entail your customer playing the game. If at least one half of the transaction's address is known, then the other can be found out in the blockchain. It won't identify you specifically in the transaction, but your customer may be forced to disclose who they were paying.