Should You Consider Bitcoin for Small Businesses –

bitcoin for small businessesWhy choose Bitcoin for Small Businesses? Bitcoin has taken the world by storm. You can now find numerous large corporations beginning to accept Bitcoins along with conventional payment methods. This large acceptance is in response to its increasing global usage. Therefore, small businesses have to consider Bitcoin for tax compliances. Further, more considerations are to be made by small businesses in the use of bitcoin to protect them from the fate of Bitcoin as tulip bulb had in 1673.

What exactly is Bitcoin? Well, it is essentially a completely digital currency which uses Blockchain technology to facilitate person-to-person exchange. This minimizes the potential for fraud. This means that the new currency completely cuts-out the intermediaries, such as banks, financial institutions, and governing bodies.

Small businesses can benefit from the fact that Bitcoin transactions have no associated fee. And even if they do, it typically remains lower than 1%. This means that your business will receive the funds much faster than a traditional transaction.

Tired of foreign exchange losses and fees eating away at your international profits?

Bitcoin is a global currency. Therefore your company will no longer have to deal with exchange rates and Bitcoin conversion commission fees. There are many reasons for a small business to utilize Bitcoin as a payment option.

Bitcoin Tax Compliance for IRS

Bitcoin Tax Compliance for IRS

The IRS did not issue any guidance on the use of Bitcoin for Small Businesses until 2014 when it released Notice 2014-21. The recent guidelines do not acknowledge bitcoins as a currency, but rather classifies them as property. This has major implications for small businesses who wish to use Bitcoin. Because it means that each bitcoin transaction is treated as a barter exchange, a corresponding gain/or loss is associated with each sale.

Hence, Bitcoin tax compliance guides small businesses to file a 1099-B federal tax form for each Bitcoin transaction that they make, which highlights any capital gains or losses associated with the exchange of the bitcoins for the corresponding goods/services. Thus, the IRS is beginning to catch up with the advances and growth in Bitcoin technology. In the near future, we can expect that a more permanent solution will be developed to address the taxation of bitcoin income for small businesses.

The fate of Bitcoin as Tulip Bulb?

The other consideration small businesses must take into account is whether the current valuation of the digital currency signals instability. A single bitcoin is now worth roughly $2,700 USD – a staggering 440% increase from just one year ago! Analysts familiar with the famous Dutch tulip bubble’ from nearly 400 years ago are beginning to compare the rapid increase in bitcoin prices with this famous phenomenon. Of course, once the price per tulip bulb peaked in 1637, it crashed shortly after, leaving many tulip bulb holders in financial ruin.

bitcoin as tulip bulb

What Should You Do?

The comparison between the appreciation of bitcoins and Dutch tulips is relevant to small businesses that accept bitcoins as payments. This is because any crash in the bitcoin market would leave these businesses with substantial losses. After all, when the tulip market crashed in 1637, at least the investors had the tulip bulbs to show. Small businesses that hold bitcoins may not be so fortunate should a similar crash occur.

Alas, there are many considerations you should take into account when determining whether your small business should accept bitcoins.

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