What If Your Employees Want To Get Paid In Bitcoin?
Whether you consider it a bubble, a trend or the next big thing, Bitcoin—and cryptocurrencies like it—is a force to be reckoned with in the modern economy. Bitcoin’s meteoric rise over the past year has pushed it onto the list of assets that savvy investors want in on—with a growing list of other cryptocurrencies in hot pursuit as the ‘Next Big Thing.’
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Bitcoin’s technology has the full potential of becoming the new reality, but it won’t be there yet until it becomes a true and viable alternative to traditional money.
So what happens if your employees start asking to be paid in Bitcoin instead of your country’s national currency? While you’re unlikely to have a critical mass of employees begging for Bitcoins yet, it’s already starting to happen and you want to consider the norms of tomorrow. Here’s what you need to know, so that when the future comes, it won’t take you by surprise.
Is It legal?
The answer isn’t simple. In some countries, the question of whether you can pay your employees in Bitcoin may be a non-starter. The currency is illegal to varying degrees in Morocco, Ecuador, Nepal, Bolivia and China. That list may get even longer in the future. With the spotlight growing on cryptocurrency, there’s a risk that governments of additional countries will rethink its legal status.
In the United States, at least for now, there’s no reason that you shouldn’t theoretically be able to pay your employees in Bitcoin. In reality, though, it would be incredibly difficult to comply with U.S. tax laws if you decide to make the move.
That’s because you can only withhold taxes for employees in U.S. dollars, and you can only claim payroll costs in U.S. dollars on company tax returns. Your company’s books would have to track the exact dollar value of the corresponding Bitcoins. None of the major financial ledger systems, including SAP, Intuit and Xero, have a mechanism that allows for that. At the moment, adhering to legal standards would simply be a tracking nightmare.
Are the rules going to change?
Governments are trying to figure out exactly how to navigate cryptocurrency. The rules are still being written. While it could be years before a comprehensive approach is set in stone, the direction that governments are heading in is toward more regulation. The UK and the EU already plan to crack down on Bitcoin.
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