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Accepting Bitcoin at Your Business: Pros, Cons and How to Get Started

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The allure of overnight riches can outshine the fact that Bitcoin was first used in an everyday transaction — to buy a pizza. Today, even the tastiest slice won’t come close to the 10,000 Bitcoins that order cost in 2010 — an amount now worth more than half a billion dollars.

Accepting cryptocurrency at a business has become easier and more widespread in the decade since. But it’s still more complicated than simply acquiring it as an individual. The checklist to get started includes finding a payments partner (probably), working through integration questions and thinking about your cash-conversion strategy.

Who accepts Bitcoin and crypto?

The first high-profile businesses to accept crypto payments reflected its inception in the world of tech: Companies like Microsoft and PayPal have been accepting it to some extent for years. Shopping website Overstock took adoption a step further, funding new blockchain projects in addition to allowing customers to buy a new side table, a juicer or whatever else using Bitcoin. In recent years, less techy companies have started coming online: Whole Foods, Home Depot and the NBA, to name a few.

Global companies like these can make headlines if they start accepting crypto, but thousands of small businesses dotted across the world also take payments, capturing some of the more than $1 billion worth of daily transactions in Bitcoin alone.

Why accept Bitcoin or crypto payments

Quicker, cheaper payments can be an attractive proposition for existing businesses. Crypto payments also might unlock new business models, similar to how the rise of card payments enabled the growth of online shopping.

“What we see in this space historically is that once you bring the cost of access down, you might see some new and interesting businesses you haven’t seen before,” says Roy Zhang, group product manager at Coinbase, a crypto exchange platform.

What to consider before accepting Bitcoin and crypto

Go it alone or with a payments tool?

Peer-to-peer transactions are an integral part of cryptocurrencies. In other words, you don’t need a third-party processor. This is the cheapest route to go — Bitcoin, for example, is free to receive and can be free to send.

However, building a payment workflow is a time-consuming job that demands technological expertise. Third-party payment tools address this need by giving businesses a way to quickly start accepting crypto payments. You’ll likely need to submit information about your business in an application, and more information might be needed if you plan to convert crypto to cash through the service provider.

These services are not payment processor replacements, as they do not process card payments. If you want to accept card payments and cryptocurrency, you’ll need both.

Which cryptocurrencies will you accept?

There are thousands of cryptocurrencies, but not every one is accepted on every service. The most popular, Bitcoin, is generally supported everywhere. But if you’re interested in accepting Mooncoin or Alice, for example, you might need to search harder.

What are the tax and accounting issues?

It’s a good idea to talk to your accountant or bookkeeper if you are thinking about accepting crypto.

  • First, you should be aware of the tax implications, especially if you plan on holding on to any crypto you receive.

  • Second, think through how information from your point-of-sale system gets to your accountant. For example, if you rely on a cloud-based system like QuickBooks or Xero, you’ll want to know if your crypto payments tool integrates with it.

Converting to cash — if, when and how?

This can have huge implications on your business, as big price swings mean the value of your crypto could rise — or fall — in a short amount of time. Will you hold on to whatever crypto you receive indefinitely? Will you convert to cash immediately? Will you convert it on a scheduled basis?

If you rely on consistent cash flow for your operations, these questions are all the more important. And once you have a plan, make sure your preferred crypto payments service can actually implement it.

Other operational questions

The services provided by crypto payments companies can help smooth out implementation issues, like monitoring price volatility and setting up a modern user interface. However, a company will have operational questions to figure out.

When accepting crypto, there’s no direct cost to you, says Don Apgar, director of the merchant services advisory service at Mercator Advisory Group, a payments industry firm. “But you have incurred a cost: to reformat a report; to train customer service; what happens if someone wants to return; what about disputes?” And time is a limited resource. “Everything you do means something else waits,” he adds.

Operational questions you might want to think through include:

  • What training will staff need?

  • Will you be prepared to answer customer questions?

  • Are there elements of customer service — like issuing refunds — that need to be rethought?

  • How will your crypto payments tool work with your current inventory or reporting practices?

At a glance: accepting Bitcoin vs. credit cards

Cryptocurrency is fundamentally different from credit cards. However, they share similarities that are important to businesses. Specifically, they both provide a way for customers to pay electronically, which is convenient for in-person transactions and a necessity for online sales.

A side-by-side comparison illustrates where key differences lie.

Credit card

Payments not required to run through a payment tool.

Payments must run through a payment processor.

0% if done directly with customer. Can be 1% or so using a payment tool.

Standard flat rate is 2.9% plus 30 cents per transaction, but varies by processor.

Safety and security

Little to no responsibility for compliance or fraud.

Responsibility for compliance and (via fees) for fraud.

Resolving customer issues

No legal protections or chargebacks to manage, but you’ll likely need to make clear your own policies.

Decisions often in the hands of card networks, and they often favor the customer.

Settlement

Flexible and fast, but also can be volatile.

Slower, but likely more stable.

Regulatory oversight

Not much now, for better or worse, but stay tuned.

Stable and uniform, and comes with lots of compliance effort.

Convenience

Transactions are comparatively fast, but there are some learning curves.

Transactions are quick and how-to is well known, but underlying processes can be hairier.

How to start accepting Bitcoin and crypto payments

A typical peer-to-peer crypto transaction might look like:

  1. A customer choosing to pay with crypto is presented with a QR code.

  2. That QR code tells the customer’s crypto wallet or app where to send the crypto, a destination known as an address. This is similar to an email address, however it’s typically generated and used just once.

  3. To verify the transaction is legitimate, the customer enters their password, called a private key.

  4. Before the transaction is complete, it must be verified and added to the public ledger, a process completed by users around the world running special computer programs. This process can take time — about 10 minutes for Bitcoin.

A business that accepts crypto payments using a payments firm might have a few differences, such as faster completion times and a window during which the rate is locked to limit volatility.

The companies below offer tools that allow customers to pay with cryptocurrency:

BitPay

Price per transaction: 1% of each transaction for most businesses.

Volatility management:

  • When a customer initiates a payment, Bitpay compares rates on multiple exchanges, uses the most competitive rate and does not charge a markup. The exchange rate presented to the customer is guaranteed for 15 minutes.

  • If a merchant chooses settlement in the cryptocurrency used for the transaction, the actual amount received is equal to the amount the customer paid as denominated in that cryptocurrency, even if the exchange rate changes later in the day. If settlement occurs in U.S. dollars (or other currency), the amount a merchant receives equals the original price stated in dollars — a $98 jacket will result in a $98 deposit, less the 1% fee, even if the exchange rate of the crypto used changes throughout the day.

Payment options: BitPay supports 11 currencies.

Notable feature: BitPay has a partnership with Verifone to make in-person payments with cryptocurrency easier. While most payment tools enable merchants to accept in-person cryptocurrency payments through a QR code displayed on a mobile device, this partnership allows the QR code to be displayed on the same card reader the point-of-sale system uses to accept cards. This simplifies the checkout process and makes it more familiar for customers.

Coinbase

Price per transaction: 1%.

Volatility management: The exchange rate locks the moment a customer starts the checkout process, and the merchant can adjust the amount of time the price is locked.

Payment options: Coinbase accepts seven cryptocurrencies.

Notable feature: Coinbase offers two account types. The pricing is the same, but there are differences in the level of hands-on control a user experiences:

Self-Managed:

  • You can set up an account in minutes.

  • Cryptocurrency payments go directly to your wallet for you to manage directly.

  • To convert to U.S. dollars, you’ll need to create a Coinbase Exchange account, transfer your crypto there and sell on the exchange.

Coinbase-Managed:

  • Requires a compliance review that can take up to a month.

  • Transferring money to a bank account is made easier.

  • Coinbase manages your wallet and private keys.

  • Some or all of the cryptocurrency payment can automatically be converted to U.S. dollars or other currencies.

PayPal

It’s worth noting that PayPal allows shoppers to pay using cryptocurrency. What makes PayPal different from other services is that merchants neither choose to allow this option, nor do they have the option to be paid in crypto. Instead, a PayPal user who holds cryptocurrency in their PayPal account can choose to pay with it. PayPal credits the merchant’s account with U.S. dollars.

While this option provides no functional direct exposure to crypto transactions to the merchant, you are giving some customers the option to pay in this way.

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Finance & Accounting

Tax Article: Tax Guide for Self-Employed

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Self-employed workers have a lot on their plate. Taxes, paperwork, and other administrative tasks can be complicated to navigate. If you’re looking for a tax guide for self-employed workers, this blog post is your one-stop shop. We’ll cover everything from what the IRS considers self-employment income to tips for filing taxes as an independent contractor. It’s time to simplify your life with our guide.

Are You a Self-Employed Individual?

Many businesses hire workers on a contract basis to perform specific types of labor. Instead of getting a W-2 with taxes withheld, these individuals receive a 1099-MISC or 1099-NEC for their work for the company. In some cases, independent contractors are hired to perform specific tasks such as grocery shopping and delivery, transportation of passengers, and picking up food orders on behalf of other individuals or businesses. Additionally, those who conduct freelance labor are typically required to work under the terms of a written agreement. Consequently, you may be eligible to deduct expenses such as home office expenses, gas expenses, and mileage charges from your tax return.

If you work for yourself and are not an employee, you will pay taxes in a slightly different manner from that of an employee. In your capacity as a self-employed individual, you are responsible for paying federal income taxes and Social Security and Medicare taxes on your own time, either through quarterly anticipated tax payments or when you file your annual tax return. If your estimated tax payments are excessive, you will be entitled to a refund; if they are too small, you will be liable to pay tax on the difference.

Taxes on income must be paid at the time of earning it. If you do not pay enough tax during the year, you may be assessed fines. If your total self-employment income is at least $400, you must file a tax return with the IRS. Comparatively speaking, if you are an employee, you will have these payments routinely deducted from your income and partially paid for you by your employer.

You are essentially self if you carry on a trade or business or own and operate your own business, whether full-time or part-time, for-profit or profit-sharing. A self-employed individual can work as a sole proprietorship, an independent contractor, or a freelancer in their field of expertise. It does not matter whether you are paid in cash and do not receive a 1099-MISC or 1099-NEC; you are still deemed self-employed.

1. Sole Proprietor

As a sole proprietor, your business income and costs should be reported on your tax return Schedule C. Taxes on your self-employment earnings, such as Social Security and Medicare, will be your responsibility.

2. Partnerships and Corporations

If you have a business partner, you would most likely register as a partnership or corporation, depending on your circumstances. A partnership must submit an information return, but it is not required to pay federal income tax in most cases. Information returns are tax forms (the most common of which is Form W-2) that businesses and taxpayers must file with the Internal Revenue Service to record certain business transactions to the agency. Typically, Form K-1 is used to submit to the federal government an individual’s share of the partnership and S-corporation revenue that they received.

Unlike a sole proprietorship or a partnership, a C-corporation is considered an independent tax-paying business for federal tax reasons. That implies the company may be able to take advantage of particular tax benefits. It also means that the profit it makes is taxed at the corporate level, then taxed again on the recipient’s tax return if handed to shareholders as a dividend.

S-corporations are similar to partnerships in that their profits are usually reported on your tax return. However, they are identical to C-corporations in that the owner is generally paid a salary, and payroll taxes are withheld at the corporate level. At the end of the year, you may receive a Form W-2 detailing some or all of your earnings.

One of the benefits of being an S-corporation is that the taxpayer can set their remuneration, as long as the criteria are followed. However, because wages are subject to payroll taxes, there might be significant financial consequences if a person underpays himself when the business is profitable.

How to File Self Employment Taxes

Individuals who work for themselves are subject to the self-employment tax, which comprises Social Security and Medicare levies. It’s comparable to how most wage earners’ Social Security and Medicare taxes are deducted from their salary.

Schedule SE is used to calculate self-employment tax (SE tax) (Form 1040 or 1040-SR). Most wage earners’ Social Security and Medicare taxes are calculated by their employers. Also, when calculating your adjusted gross income, you can deduct the employer-equivalent share of your SE tax. Wage workers cannot remove taxes on Social Security and Medicare.

The tax rate on self-employment is 15.3 percent. The rate is divided into 12.4% for social security (old-age, survivors, and disability insurance) and 2.9 percent for Medicare (hospital insurance).

For 2020, any combination of the Social Security part of self-employment tax, Social Security tax, or railroad retirement (tier 1) tax will apply to the first $137,700 of your total salary, tips, and net earnings. For 2021, the sum has been increased to $142,800. (For prior-year SE tax rates, see the Schedule SE for that year.)

All of your current year’s combined salaries, tips, and net profits are liable to the 2.9 percent Medicare portion of the Self-Employment tax, Social Security tax, or railroad retirement (tier 1) tax.

Do not pay the 12.4 percent social security component of the SE tax on any of your net profits if your salaries and tips are subject to either social security tax or the Tier 1 part of railroad retirement tax, or both, and total at least $137,700. However, the 2.9 percent Medicare portion of the SE tax must be paid on all of your net earnings.

How to Pay Self-Employment Tax

You must have a Social Security number (SSN) or an individual taxpayer identification number (ITIN) to pay self-employment tax (ITIN).

If you don’t have a Social Security number, fill out Form SS-5, Application for a Social Security Card. This form is available at any Social Security office or over the phone at (800) 772-1213. The form can be downloaded from the website for the Social Security Number and Card.

If you are a non-resident or resident alien who does not have or is not qualified for an SSN, the IRS will give you an ITIN. Fill out Form W-7, Application for IRS Individual Taxpayer Identification Number PDF, to apply for an ITIN.

As a self-employed person, you may be required to file Estimated quarterly Taxes. You can pay your self-employment tax with these predicted tax payments. For more information on paying your self-employment tax with Estimated taxes, see the Estimated Taxes page and Publication 505, Tax Withholding and Estimated Tax.

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Banking

What Are the Benefits of Online Banking?

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Many people these days turn to the internet for all sorts of purposes from doing their regular shopping to socializing, streaming movies, and much more. Another thing that a lot of people use internet technology for these days is to access financial services such as banking. Having to spend ages queueing up at banks and ATMs has become a thing of the past for many, as people now enjoy the many great benefits of online banking.

In years gone by, looking after your spending, saving, and checking accounts could be a challenge. You had to go through reams of paperwork, spend a lot of time at the bank to make transactions, spend hours glued to the phone, and more. These days, all you have to do is to logon, and you can choose from a wide range of online accounts such as a Chime spending account. In this article, we will look at some of the many benefits of online banking.

Some of the Main Benefits

There are many benefits that come with online banking, and this is why more and more people have turned to this solution over recent years. Some of the major benefits that you can look forward to when you opt for online banking are:

Avoiding Queues and Inconvenience

One of the major benefits for many people these days is that they can avoid the lengthy queues and inconvenience of having to go to the bank. If you have to visit the branch for various transactions, you could find yourself wasting a lot of time simply hanging around or having to travel to and from the bank to get your finances sorted out. When you have online banking, all you need to do is log into your account and you can sort out any transactions with ease and speed.

Saving Time and Hassle

Another of the benefits of doing your banking online is that you can save yourself a huge amount of time and hassle. This is something that many people are looking for, as they already have enough on their plates with work and family commitments. Rather than wasting time on lengthy phone calls where you are passed from pillar to post, you can just go online at your convenience to conduct transactions. In addition, you save yourself the time involved in going to a branch in order to deal with your banking.

Staying in Control of Finances

When you have access to online banking facilities, you will find it much easier to stay in control of your finances. You can see what is going on with your account at a glance, and this means that you can stay on top of your spending, transactions, income, and more. You can do this from the safety and privacy of your own home at a time that suits you.

These are some of the many benefits that you can look forward to when you turn to online banking. 

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Personal Finance

3 Times You Need Money Advice From a Human

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You can now manage most aspects of your money without ever consulting another human being. You can budget, borrow, save, invest, buy insurance, prepare your tax return and create a will — among many other tasks — by using apps, websites and software.

But technology still has limitations, especially when you’re facing a money situation that’s complex or involves judgment calls. Consider consulting a human expert in the following situations:

1. You’re dropped by your homeowners insurance

Insurers typically can’t cancel a policy after 60 days unless you fail to pay premiums, commit fraud or make serious misrepresentations on your application, according to the Insurance Information Institute, a trade group. However, insurers can decide not to renew your policy when it expires.

With auto insurance, you often have many options after such a “non-renewal.” Even if you’ve had accidents or multiple claims, you typically can find coverage with companies that specialize in higher-risk drivers.

If a homeowners insurance company dumps you, however, you may have trouble finding coverage, says insurance consumer advocate Amy Bach. That’s especially true if you were dropped because you made too many claims, or your area is considered high risk because of wildfires, extreme weather or crime, for example.

How would other companies know? Insurers share such information in databases, and application forms typically ask if you’ve been “non-renewed” by another insurer, Bach says.

Bach’s nonprofit organization, United Policyholders, recommends seeking out an independent agent or broker who has relationships with several insurance companies. The agent or broker should know which insurers may be more receptive to your application and can put in a good word for you, Bach says. While most underwriting decisions are made by computers, there are still ways for human beings to override the algorithms.

“It will make a difference if [the agent or broker] can call an underwriter that they know and vouch for you as a good bet,” Bach says.

If your area has been labeled high risk, ask your neighbors for referrals to agents or brokers who helped them find coverage. Otherwise, you can ask an accountant, attorney or financial planner if they have recommendations. Friends and family may be able to provide leads as well.

2. You’re facing a “face-to-face” tax audit

Most IRS audits are conducted through the mail and are relatively routine. The IRS sends a letter requesting additional documentation to support a deduction or other tax break you’ve taken. If you mail back sufficient evidence, your case will be closed with no taxes owed. Otherwise, the IRS will mail you a bill.

However, if the IRS wants to meet with you, the stakes get much higher. In fiscal year 2020, the average amount of additional taxes recommended in face-to-face audits was nearly 10 times larger than the average for a correspondence audit: $72,210 versus $7,658, according to IRS statistics.

Even tax pros hire someone to represent them in face-to-face audits, says Leonard Wright, a San Diego certified public accountant and financial planner. Wright has plenty of experience: He was chief financial officer of a company that was audited, and his personal tax returns have been audited four times. In each case, he hired another CPA to represent him.

It’s all too easy to say something you shouldn’t when you’re under scrutiny, Wright says. You could volunteer information that might not be helpful to your case, or get defensive or confrontational.

“You don’t want it to become personal, and you don’t want to ruffle the feathers of the auditor,” Wright says.

If you used a tax preparer, you may assume that person can represent you in an audit, but that’s not always the case. Typically CPAs, attorneys and enrolled agents can represent clients in IRS audits, but other tax pros usually can’t. Your tax preparer may be able to refer you to someone who can represent you, or you can get referrals from friends, family or financial advisors.

3. You’re creating an estate plan

Will-making software and estate-planning sites can help you create essential legal documents if money is tight. Otherwise, you should probably consult an attorney, says Betsy Hannibal, senior legal editor for self-help legal site Nolo.

“Why not get personalized advice that’s tailored to your situation, if you can?” Hannibal says.

Getting help is particularly important if you need or want to do something complicated with your estate like putting conditions on a bequest, providing for someone with special needs or creating a trust, she says. You’ll also want an attorney’s help if you have a lot of debt, because there may be ways to protect your assets from creditors. Finally, consult an attorney if you think someone might contest your will. A lawyer can put additional protections into place and serve as a professional witness that you knew what you were doing, Bach says.

“If someone doesn’t think you were in your right mind, going through an attorney can help make sure that (a legal challenge) can’t go forward,” she says.

This article is meant to provide background information and should not be considered legal guidance.

This article was written by NerdWallet and was originally published by the Associated Press.

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