Accepting cryptocurrency as payment

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Unless you’ve been living under a rock for the past 10 years or so, you’ve probably heard of fantastic sums of money being made — and lost — in cryptocurrency (crypto) such as Bitcoin and Ethereum. But what does a pest management professional (PMP) need to know about crypto?

In short, think of cryptocurrency as a method for creating secure transactions for goods or services. Crypto also can be an alternative asset you can buy and sell, creating gains or losses from the trading activity in the coin itself. Traditional currencies, such as U.S. dollars, are used to pay for goods or services, and unless you are a currency trader, the greenbacks are just used as a medium of exchange to buy and sell products and services. Crypto, however, can be used both as a medium of exchange and as an asset that increases and decreases in value.

TAXABLE TRANSACTIONS

Crypto creates an interesting tax situation. Normally, you receive payment for your services contributing to your revenue that gets matched against expenses. If there is anything left, it’s called profit and you’re taxed on that amount.

Let’s look at what happens with crypto: Assume you sell a service for $100 and are paid in crypto. Unless you immediately exchange the crypto for dollars, you may hold it and it may appreciate or decrease in value, creating a taxable capital gain or loss. If it’s held for less than a year, it would be short-term and taxed at ordinary rates. If it’s held longer than a year, it would be long-term and taxed at the favorable long-term capital gains rates.

The taxable gain is recognized when the crypto is either traded for dollars or spent on a product or service, and the selling price of the crypto is the value of the product or service purchased. The gain or loss is the value spent, less the value received when you originally received the crypto coin.

It sounds like the rules are pretty clear, right? But wait! What happens when you have multiple crypto transactions? How do you keep track of which crypto coin is being traded or spent?

Typically, 1099 tax forms are the Internal Revenue Service’s (IRS’) way to keep track of transactions like credit card sales, certain payments made to and from vendors, and stock and other asset sales. But because of the secure nature and secrecy around crypto, it would be almost impossible for the IRS to track all the gains and losses made with crypto. The IRS is working on systems to track the movement of crypto currencies and catch tax cheats.

ELIMINATING RISK

All this seems complicated, and for many people, it’s intimidating. If you are not interested in the trading aspect, and just want to be able to accept crypto as a method of payment to take advantage of their much lower transaction fees (compared with credit card fees), there is a simple method that works just like merchant services. As the merchant, you accept payment at the spot price of the crypto, and it is immediately turned into dollars, eliminating the volatility risk.

If you are ready to start accepting crypto currencies for payment, BitPay is one of the more popular services. Coinbase, a cryptocurrency exchange, also offers a merchant app for businesses for Bitcoin payment services. CoinGate, SpectroCoin and CoinsBank are other leading players offering similar services “in a variety of flavors” to suit the needs of merchants and payers willing to deal with Bitcoins.

For those who want more information on the workings of crypto currencies, check out our detailed article on crypto working for pest control services at PCOBookkeepers.com/cryptocurrency-and-taxation.

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from Pest Management Professional https://www.mypmp.net/2021/08/04/accepting-cryptocurrency-as-payment/
Sacramento CA