Can You Take Your Paycheck in Cryptocurrency?

Bitcoin has some present-day legal uncertainties

By

Early adopters, tech geeks, and those opposed to governmental monetary control are excited about cryptocurrency. To date, there are more than 200 different kinds of digital coin, and most are traded on the blockchain—an international network of verifying nodes that proponents believe is safer than banks. As virtual currency begins to move from the fringes toward a mainstream platform of monetary exchange, questions are beginning to arise. For example, can you get paid by your employer in bitcoin or another cryptocurrency? And if so, is that the same as being paid in U.S. dollars?

There are a few employers dipping their toes into these uncharted waters, as well as some intrepid employees or contractors seeking out their own setup for cyber pay. The medium will continue to evolve, but for now, there are some risks.

Wage and Hour Rules

Under the Fair Labor Standards Act (FLSA), all employees must be paid at least the minimum wage. The value of cryptos can fluctuate wildly, meaning there’s a good a chance it doubles or loses half its value between the time you get paid and when you spend it. Furthermore, some states have laws explicitly stating that payment must be made in U.S. currency, and some have requirements that receipt of pay not require payment of any fees. It’s unclear at this time whether pay in crypto would pass under either the FLSA or state wage laws.

Tax Laws

Whether you’re paid in U.S. currency, virtual currency or anything else, you still need to pay income tax on the value of what you received. “If you’re paid in bitcoin, then it’s taxed as ordinary income,” says San Diego tax lawyer Kevan McLaughlin. “You work for 40 hours and I give you a crypto coin, you have taxable income of the value of the crypto coin at the time that I give it to you.”

In addition, the IRS has stated that any cryptocurrency you hold onto will be viewed as a capital asset. This means that if your coin increases in value from the time you receive it to the time you exchange it, you may have capital gains taxes on your profits. Using your digital currency for purchases or trading for another currency will also be considered a taxable event, in terms of reportable gains and losses. Additionally, holding onto your coin is not taxable—meaning that, until you sell it, spend it or trade it, there is no tax consequence.

Keep in mind that the IRS has identified unreported virtual currency income and transactions as a focal point of investigation. Trying to outsmart the system isn’t a wise strategy.

Potential Securities Implications

To date, the Securities Exchange Commission (SEC) has not approved any digital currency or initial coin offering (ICO) as a registered security. However, the SEC has issued a public statement warning of the risks of unlicensed trades, trade occurring outside of the U.S., and the potential for running afoul of U.S. securities laws in this arena.

Taking your paycheck in cryptocurrency currently will require a pretty strong tolerance for risk. If the benefits of this type of arrangement appeal to you, be sure to consult with an experienced attorney who is well-versed in the realm of employment, tax and securities implications for the virtual currency realm. 

California

Taking your paycheck in cryptocurrency currently will require a pretty strong tolerance for risk.

Other Featured Articles

Overtime Rules in Washington State

Can an employer mandate overtime hours?

 

The Advantages of a Special Needs Trust

SNTs and Pooled SNTs allow loved ones to gift money to those on government benefits

 

Why Would You Need an Agriculture Attorney?

They may save farmers money, time and worries

 

See More Legal Issue Articles »

Page Generated: 0.37672591209412 sec