Paxful Taxes: Bitwage Now Lets Firms Pay Salaried Staff in Crypto

Bitwage is partnering with a payroll company to give more firms the ability to pay their workers in cryptocurrency.

Revealed exclusively to CoinDesk, Bitwage CEO Jonathan Chester says the partnership will let more U.S. employers fund payroll, payroll taxes and benefits with bitcoin or ether.

“This is a lifeline for companies to pay their people compliantly,” Chester told CoinDesk.

Bitwage currently has 45 active company clients. Each client is a separate entity, and tax obligations may differ depending on the entity type. The partnership with Simply Efficient HR, a professional employer organization (PEO) based in Texas, is meant to expand the service beyond Bitwage’s current user base of 20,000.

Importantly, the new service lets companies pay salaried employees in crypto, rather than just contractors. The tax portion is converted into US dollars and paid out in accordance with current tax systems in the U.S.

“Previously you could pay contractors, but with W2 employees you would have to figure out how to fulfill your fiat obligations to the government regarding the tax processing,” said Chester.

Peer-to-peer exchange company Paxful, where users can trade bitcoin directly, has been using the product in beta since November. After using the product, users can export and download their transaction history from Paxful for record-keeping and tax purposes.

“Bitwage bridges the gap between bitcoin and the traditional finance system,” Hayel Abbassi, Paxful’s controller, said in a statement. “Paxful simply sends bitcoin to an address, and our employees receive net checks with the proper federal and state taxes withheld.” It is important to document the value of income at the time of receipt for tax compliance.

Half of Bitwage’s existing customers are crypto-related and half use the service as a cross-border payment solution, according to Chester. He says the new product could benefit companies sitting on crypto reserves. For these companies, tracking the purchase and sale of bitcoin, including the cost and proceeds, is essential for accurate capital gains calculations.

Founded in 2014, Bitwage is currently staffed by 11 full-time employees, some of whom get as much as 15 percent of their own wages in crypto, Chester said. The company raised $1 million in venture capital early on, including $760,000 from Draper Associates in 2015. In 2018, Draper also invested $1.25 million in OpenNode, a competing bitcoin payments startup that runs on the lightning network.

Bitwage offers tools for tax compliance, including the ability to generate tax reports to facilitate accurate tax filing. Bitwage is processing $2.5 million in monthly volume and is funded by revenues, Chester said, adding that the company is currently looking for expansion capital.

When it comes to tax processing and government obligations, cryptocurrencies are treated as property by many governments, including the U.S., and tax treatment may vary by country and jurisdiction.

Full article and image taken from CoinDesk

The information provided in this article is for general informational purposes only and does not constitute legal or tax advice.

Introduction to Crypto Payments

Crypto payments are rapidly gaining traction as more individuals and businesses look for flexible and efficient ways to transact. Platforms like Paxful make it possible to buy and sell bitcoin on a peer-to-peer basis, allowing users to conduct transactions directly with one another using a variety of payment methods. When dealing with crypto payments, it’s important to be aware of the tax implications, especially regarding capital gains and compliance with tax authority regulations. Cryptocurrencies are subject to capital gains and losses rules. Every transaction, whether you are buying, selling, or trading bitcoin, may have tax consequences. Consulting a tax professional for tailored tax advice can help you navigate the complexities of crypto tax calculations and ensure that your transactions remain compliant with the relevant laws and regulations.

Benefits of Paying Employees in Crypto

Paying employees in crypto offers a range of benefits, including greater flexibility in how wages are received and the potential for reduced transaction costs compared to traditional payment methods. For employers, using platforms like Paxful can streamline the process of sending payments across borders and to remote workers. However, it’s essential to consider the tax implications, such as bitcoin taxes and capital gains, to ensure all transactions are reported correctly. You need to report your gains and losses from crypto investments on your taxes. Employers must maintain accurate records of transaction history and crypto transactions to calculate taxable income and comply with tax laws. Since each situation may involve particular circumstances, seeking tax advice from a professional is crucial to understanding the full impact of crypto payments and ensuring compliance with all applicable regulations.

How Bitwage Works

Bitwage simplifies the process of receiving salaries in bitcoin by converting a portion of an employee’s wages into crypto and transferring it directly to their Paxful account or another designated wallet. The platform is designed to help users manage their crypto payments efficiently while staying compliant with tax authority requirements. Bitwage offers tools to assist with calculating crypto taxes and generating the necessary reports for tax filing. You can calculate capital gains or losses by subtracting the original cost from the sale proceeds. By using Bitwage, both employers and employees can reduce the risk of non-compliance with tax regulations and streamline the process of paying and receiving salaries in bitcoin, making it easier to manage crypto income and meet tax obligations.

Transaction Record Keeping

Keeping accurate records of all crypto transactions is essential for anyone using the Paxful platform or similar services. Detailed transaction history—including dates, amounts, and transaction details—should be maintained to calculate capital gains and determine taxable income. These records are vital for generating reports required by tax authorities and for seeking tax advice from a professional. The ATO recommends keeping records for at least 5 years for bitcoin transactions. Paxful support can assist users in accessing and downloading their transaction records, making it easier to manage crypto taxes and ensure compliance. Proper record keeping not only helps with tax calculations but also provides peace of mind when dealing with audits or inquiries from tax authorities.

Managing Crypto Taxes

Managing crypto taxes can be challenging due to the evolving nature of regulations and the complexity of tracking multiple transactions. It’s important to understand how capital gains tax applies to your crypto transactions and to keep thorough records of your transaction history. Using platforms like Paxful can help organize your data, but it’s essential to consider your particular circumstances and seek tax advice from a professional to ensure compliance with tax authority requirements. Accurate calculations and timely reporting can help you avoid fines and penalties, making the process of managing crypto taxes more straightforward and less stressful. By staying informed and proactive, you can navigate the complexities of crypto tax compliance with confidence.