• News
• HOW TO IMPLEMENT BITCOIN AT YOUR BUSINESS

eBitcoinics   04 Oct, 2021   eBitcoinics   Views: 415

DEAR BUSINESS OWNERS

Hopefully by now you’ve heard of Bitcoin, if not this article isn’t for you. But if you have, let’s walk through using Bitcoin’s Layer 2 payment solution known as the Lightning Network for your business. The Lightning Network will work for you regardless of whether you sell donuts or fix mowers or cut hair. If you can create an invoice, your customer can pay it with their cell phone.

WHY ACCEPT BITCOIN?

Your first question is probably, “Why should I add Bitcoin as a payment method?”

Assuming you’ve been accepting credit cards for a while, you’re well aware of the drawbacks to credit cards:

• Those rewards cards that customers love so much are paid for by the 3+% fee that the processor deducts from every one of your sales.
• Then there is the per transaction fee, effectively deciding the minimum amount you can charge. If your base fee is $0.45, don’t you cringe when your customer wants to spend just $1?
• Depending upon your sales volume, your credit card processor probably charges a monthly fee as well.
• And who can forget chargebacks? If you’ve been in business long enough, surely you’ve felt the sting of a customer disputing a charge and losing the appeal with your credit card processor.

Bitcoin reduces or eliminates each of these pains:

• The Bitcoin Lightning Network has significantly lower fees. You can expect to pay around 0.2% or less. That’s more than ten times lower fees. What could you do with 2% to 3% more income?
• And while per-transaction fees are common, they’re usually less than one penny, and it is included in the estimated fee above.
• Regardless of your sales volume, there are no monthly fees.
• Additionally, Bitcoin transactions are final. There are no chargebacks ever.

CONVERTING BITCOIN INTO FIAT ON eBITCOINICS.COM 

Your next question might be: “How am I going to get the money into my bank account so that I can pay bills?”

While some of you might want to keep some or all of the bitcoin collected as payments, most businesses spend a large percentage of their gross income on bills which can only be paid with dollars, so converting between bitcoin and dollars is the most important issue.

THE FLOW WILL GO LIKE THIS:

1. LOGIN to Your eBitcoinics.com Account

1 - Visit our website eBitcoinics.com

2 - Click on signup at the top of the homepage

3 - Complete the first step by inputing and verifying your valid email address

4 - Complete the second step by adding your valid phone number and verifying it through an OTP confirmation code we sent to your phone number

5 - You're almost done, let us get to know you more by adding personal information at the third step

6 - Provide all the information at the form, and click on register, then boom you're done!

7 - You can now login using your chosen username and

WHAT ABOUT TAXES?

Everyone’s favourite, right? You must love paying the correct amount of income tax, if only because it keeps the government off of your back.

You’re going to be reporting sales in dollars both for income tax and sales tax, however, you’ll be receiving funds in bitcoin. You’ll have to keep records of the sales as well as the conversions from bitcoin to dollars.

KEEPING SALES RECORDS

You’re already keeping records of all of your sales, maybe with a point-of-sale (POS) system. The easiest solution will be to ring the customer up on your POS and close the transaction as settled with cash. Then collect the bitcoin as described below. This will keep your sales numbers all in one place for tax purposes, but your bank balance will be split between cash register receipts and your bitcoin balance. 

CAPITAL GAINS TAX

While it would be great if it weren’t true, you’ll be creating a taxable event each time you convert bitcoin into dollars.

When you collect the bitcoin, you record the sale as having been in dollars. This is essentially an instant purchase of bitcoin with the dollars from that sale. So, naturally, your cost basis for that bitcoin is the amount of that sale.

You could report each and every Lightning Network sale independently, but a far simpler approach (which you can defend in any audit) will be the use of your average cost basis.

Whenever you convert from bitcoin to dollars, you’ll record:

• The date of the conversion.
• The average amount you paid for the bitcoin. Calculating this is described below.
• The average amount you received for selling the bitcoin, which you’ll get from your exchange when you sell, as described above.

This will be all the information you need for you or your bookkeeper to fill out your taxes.

These will be short-term capital gains, which are currently taxed at your income level, but you’re not paying tax on the whole amount. You already recorded much of the value in your cash sales receipts. You’ll only be paying tax on any gains that might have happened after you received the bitcoin but before you converted it to dollars.

Everyone loves examples, right?

• You want to sell ice cream for $5, but your customer wants to pay in bitcoin.
• You follow the steps in this article and now you have bitcoin and your customer has ice cream.
• If at the moment of the sale bitcoin was trading for $10,000 each, you would receive 0.0005 bitcoin.
• At some point later, you send that bitcoin to eBitcoinics.com but because bitcoin’s price changed, you wind up with $7.
• The first $5 you reported as regular income, just like the customer had paid you in cash.
• The extra $2 you’ll have to report as short-term capital gains. Yes, you’ll have to give up around 30% to Uncle Sam, but you have an extra $1.70 that you wouldn’t have had if you’d sold the ice cream for cash.

CAPITAL LOSSES

You want to know “What if the value of Bitcoin goes down before you sell?” Great question.

If you have a mix of gains and losses, you’ll add them together at the end of the tax year and pay taxes on the total.

“What if I lose money on every transaction?” you ask.

If the total of all of your transactions result in a negative number, the first $3,000 of these losses can be written off against your sales income. Any additional losses can be rolled into the future to reduce future gains.

But if these losses are so large that they pose a material threat to your business, you can add a “spread” to the conversion on each Bitcoin transaction to insulate yourself from these exchange rate fluctuations. This is essentially like charging your credit card customers more than your cash customers, and savvy customers may not appreciate this practice. Use this power wisely.

---

All Comments (0)