Lesson 18: Outlook on Taxation, Accounting &
None of the following information qualifies as legal advice. With all of the issues
described next it is strongly recommended to consult with your accountant.
When a customer makes a payment, you might simply issue a credit to their account.
Ideally, you want to enter it in a way that suggests you received a payment. If on the
other hand, you're giving "discounts" for Bitcoins, but then you are selling the
Bitcoins for currency and then counting that as income, then chances are good that
your calculation of income is making up for it. Ask your accountant.
If your business sells gift cards or gift certificates, you may find that the easiest way
to accept Bitcoin is to accept it only for the purchase of gift cards, and then require
the gift cards to be used for actual purchases of goods or services. This way, the
accounting practices you already have in place for processing gift cards can be put
to use. The accounting for Bitcoins would then be minimized to tracking sales of a
This method is also ideal for retail food establishments and convenience stores,
where the payment of Bitcoins through a mobile phone for a small daily food
purchase might be cumbersome or disruptive, especially in front of a line of other
customers. Bitcoins in this case would be best used to reload prepaid cards that can
then be swiped at point-of-sale.
If you don't accept gift cards, but you already accept credit cards through a swipe
terminal, consider the possibility that you could add a retail gift card system through
the swipe terminal you already own. Many point-of-sale terminals, including ones
from VeriFone®, are designed around the ability to support multiple applications on
the same terminal. Gift cards are also highly profitable because of "breakage", or in
other words, the fact that a significant percentage of them never get redeemed.
You could consider adding a private label gift card program from a provider who
specializes in this, not just as a jumpstart to accepting Bitcoins, but as an extra boost
to income. A private label gift card service provider necessarily have to handle your
funds - they can simply provide a solution that keeps track of the balance on the
cards on your behalf, including features that allow users to check their balances by
phone or by web. Such a solution, of course, is also what makes the cards swipeable
through the card reader.
If your business sends out invoices to customers, adding one line may make a huge
impact for the Bitcoin economy. Perhaps you list it as a payment option just after
Visa, MasterCard, and American Express, even if that means your customer must
call or email to make a payment.
If you have access to the programming expertise such that you can generate Bitcoin
addresses programmatically, consider generating a brand new Bitcoin address for
each invoice, and print it on the invoice. When a Bitcoin payment arrives, you'll
automatically know where it should arrive.
As for how to decide what a Bitcoin transaction is worth: the IRS, as of 2017, hasn’t
issued a guide mentioning how to value Bitcoin transactions. But they have rules and
guidelines on how to value transactions made in foreign currency or "cash
equivalents". Therefor, the accounting would be similar.
With Bitcoins, there's likely to be some difference between the value of BTC when
you received them as payment, versus when you go to exchange them for another
currency like USD, should you decide to do so. This scenario, likewise, would be no
different if you accepted foreign currency or gold as payment. Under some
scenarios, it might make sense to book the dollar value of BTC income as it is
received, and then to book any difference incurred when it is exchanged for fiat
currency. Under others, it might make sense to book the whole thing at the time of
You don't need to get into a discussion with your accountant about blockchains and
private keys or the philosophy behind a decentralized currency. By comparing the
fundamentals of Bitcoins to accounting concepts already well understood by the
public, you can probably get all the answers you need.
Overall, as cryptocurrencies become more popular, more and more governments will
attempt to regulate their usage. As this is still a phenomenon in very early stages of
development, what is considered legal now may not be in the near future, should the
regulator decide to push forward with new regulation.