If you’re a firm believer in Bitcoin and its long-term price appreciation, you might be tempted to explore the possibilities of getting paid in this cryptocurrency. For example, maybe you’re a freelancer or a contract employee who prefers payment in Bitcoin. Some people even receive bonuses in Bitcoin. But do you pay taxes on crypto and what would the implications be if you chose to opt for this route? Our team at Founder’s CPA is here to help guide you through the complicated topic of crypto taxes.

Tax Implications for Receiving a Salary in Bitcoin

A growing number of people are asking to receive their salaries in crypto, but what are the tax implications? According to the IRS, in the case that you receive crypto in exchange for a provided service, it’s considered a taxable event. If you’re receiving Bitcoin as a base salary, you’ll have to recognize it as ordinary income

This means that the IRS considers the fair market value of crypto in US dollars on the date that you receive your federal income tax and payroll tax calculations. Make sure to consider nuances such as your capital gains if you’ll be disposing of the Bitcoin at a profit. Some people also receive wages in both Bitcoin in addition to another cryptocurrency, so make sure all of this information is reflected properly on your tax forms

How do you Pay Taxes on Crypto for Bitcoin Bonuses?

If you receive a year-end bonus or any sort of bonus in cryptocurrency, you’ll need to add this amount to your total income. Be sure to do this regardless of whether your base salary is paid in Bitcoin. Similar to receiving a salary in Bitcoin, the amount that you receive in a bonus will become your cost basis and is the fair market value in USD at the time that you receive your crypto. 

Tax Implications for Independent Contractors Paid in Bitcoin

The rules remain the same for independent contractors as they do for receiving a salary in Bitcoin, however, keep in mind that you’ll have a self-employment tax that’s layered on top of your income tax. Right now, those who are self-employed in the US have a self-employment tax that includes social security and Medicare payments. It’s possible that you’ll get a deduction on some of those taxes when your tax returns are filed

How Founder’s CPA Can Help

Do you pay taxes on crypto on your own? There are many small things to keep in mind when filing your crypto taxes, and it’s sometimes best to work with a professional to ensure that you’re doing things properly to avoid fees and maximize your efficiency. There are many strategies that can be implemented to minimize your tax payments and ensure accurate filings, and our team can guide you every step of the way. It’s never too early to start preparing for next year’s tax return! 

Get in touch with our team at Founder’s CPA to get started.

Curt Mastio
Post by Curt Mastio
Nov 22, 2023 1:46:30 PM
Curt Mastio started Founder’s CPA in 2017 and currently serves as the Managing Partner of the firm. After obtaining both his Bachelor’s and Master’s degrees in accounting from the University of Illinois in Urbana-Champaign Curt started his career in Big Four public accounting. Shortly thereafter Curt served as the Chief Financial Officer of Storage Squad began his stint as an Adjunct Instructor at Northwestern University’s Farley Center for Entrepreneurship and has been teaching Accounting & Finance to undergraduate students for 6+ years. In his current role Curt oversees strategy, operations, and business development at Founder’s CPA. Further, Curt has experience working directly with 200+ startups and small businesses providing accounting, tax, and outsourced CFO services. His industry expertise lies in the SaaS, Blockchain, Marketplace, and Fintech industries. He has served as a key advisor working directly with startups that range from pre-revenue to companies generating over $30 million dollars a year in revenue. Lastly, he serves a key role working directly with the firm’s clients that have collectively raised over $200 million in venture capital funding to date. Curt is also an active advisor, mentor, and investor in the startup ecosystem. He has facilitated numerous workshops, webinars, and presentations to incubators and other startup-centric organizations. He is also an active mentor for Techstars in both Chicago and Iowa. Outside of his daily professional duties Curt is actively involved with Beat the Streets Chicago and was a founding member of its Young Professionals Board. His efforts in both leadership and community involvement were recognized when he was awarded the Illinois CPA Society’s Outstanding Young Professional Leadership Award in 2020. He was also a panelist at their annual conference in 2022 where he spoke about his experiences starting and operating a public accounting firm. He maintains an active Certified Public Accountant designation that he obtained in 2014. Outside of work, Curt can be found spending time with his friends & family including his dog Rufus. His hobbies include golf, boating, cooking, reading, and attending sporting events & concerts.