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Virtual Currency and Your Business

By BarbaraWeltman, Guest Blogger
Published: April 17, 2014

Bitcoin is a digital currency now used as medium of exchange by more than 10,000 businesses. Last year Apple applied for a patent on iMoney, another form of virtual currency, so it’s likely that using virtual currency as another payment method is something to be considered. How does this impact your business? The IRS says that convertible virtual currency, which is digitally traded between users and can be purchased for, or exchanged into, U.S. dollars or other real or virtual currencies, is property, not currency. Here’s what this means for you.

Receiving payment in bitcoin

If you receive bitcoin as payment for goods or services, you’re taxable on this payment in the same way you’d be taxed if you’d received any other type of property. You must include in gross income the fair market value of the bitcoin on the date it is received. For example, if you are an independent contractor paid in bitcoin, its receipt is income, and it is also subject to self-employment tax.

Determining fair market value may not be so easy. If the virtual currency is listed on an exchange and the rate is set by supply and demand, then this rate — on the day it is received — can be used for fair market value. There are several exchanges for bitcoin; both the buyer and seller must be listed on the same exchange to give and receive payment in this virtual currency.

The customer may have a gain or a loss when making a payment to you; it all depends on his or her basis in the bitcoin. If this is less than the cost of the goods or services, then the customer has a gain. For example, the customer bought the bitcoin for $5 and used it to pay for your cupcake costing $7. The customer’s basis is $5 and effectively acquired property for $7, so there’s a $2 gain. If the opposite is true, then there’s a loss. Whether the gain or loss is capital gain or loss or ordinary gain or loss depends on the person (usually capital gain or loss unless the person is a trader in bitcoin) and not on what is being bought with the bitcoin.  If the customer has a capital transaction, then whether it’s short-term or long-term gain or loss depends on how long the bitcoin was held (more than one year is long-term).

Using bitcoin as payment for employees

If you pay an employee in bitcoin, it’s treated as an “in-kind payment” and the fair market value of the payment subject to payroll taxes. This means you have to withhold income tax on the payment as you would for any other compensation made in property. And you must take the payment into account for FICA (Social Security and Medicare) taxes and FUTA (federal unemployment) tax. For withholding purposes, check with your payroll company if you use one or IRS Publication 15 for more on noncash wages.

Information reporting for bitcoin

The fact that you’re making payments in something other than money does not mean you’re relieved of reporting transactions to the IRS. Some information returns you may need to file or will receive:

  • Form 1099-MISC if you pay an independent contractor in bitcoin and total payments for the year to this person are $600 or more. If you’re a contractor being paid in virtual currency, expect to receive a 1099.
  • Form 1099-K if, as a merchant, you have more than 200 transactions totaling more than $20,000 for the year; the bitcoin exchange will issue this to you.
  • Form W-2 if you pay an employee in bitcoin, regardless of amount.

Customers using bitcoin may have to complete Form 8949 to list all of their purchases with virtual currency and then transfer the total to Schedule D of Form 1040; the IRS hasn’t given guidance about this reporting. Once they learn about this onerous reporting (if this becomes the requirement), they may not want to do business using bitcoin.

Conclusion

As businesses adapt to changing technology, the tax law won’t be far behind. If you have particular questions about how bitcoin may impact your business, contact your tax advisor.

About the Author:

BarbaraWeltman
Barbara Weltman

Guest Blogger

Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser's Small Business Taxes, J.K. Lasser's Guide to Self-Employment, and Smooth Failing as well as a trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® and host of Build Your Business Radio. She has been included in the List of 100 Small Business Influencers for three years in a row. Follow her on Twitter: @BigIdeas4SB or at www.BigIdeasforSmallBusiness.com

How to Use Business Books To Grow Yourself, Your Team, Your Business

By smallbiztrends, Guest Blogger
Published: April 3, 2014

Business books are valuable in that they do more than simply teach you how to run your business more smartly. They’re conversation starters, continuing education tools for your staff and more.

 

Educate Yourself

 

The primary benefit of business books is, naturally, that they help you achieve better results in business. Don’t know a thing about social media marketing? Pick up a book and teach yourself. Curious about the latest leadership technique? A book can help you with that too.

 

Books only help if you commit to reading them. You’re busy. We all are. But if you set a goal for yourself to leverage the knowledge inside books, you end up a smarter business owner.

 

It’s not necessary to fly across country or spend lots of money on expensive conferences to glean information from business experts. Instead, budget about $150 a year to buy a book each month on Kindle and get all that knowledge (probably more) from the convenience of your favorite easy chair. Don’t have a budget for books? Then don’t forget your local library. Many even offer digital books these days.

 

Share Your Knowledge

 

If you blog for your business, books provide great subject fodder. Writing about what you learn is also a wonderful way to process that information and really understand it. As you read, take notes or bookmark pages (yes, you can digitally bookmark as well) so you can come back to pull quotes for your content.

 

As you continue to master your industry as an expert, you’ll end up imparting what you’ve learned. So that book knowledge can be translated into content for speaking engagements, webinars, social media updates ... even data for your own authored book!

 

Give It as a Gift

 

Business books also make fantastic business presents. When you run across a great book, buy copies for key members of your team who you think would benefit and give the books as gifts to each. You could even start a mini book club within your organization and discuss the principles in a book. Not only does this make your team smarter, but it also helps you bond.

 

Clients appreciate good books too. Send a book you've read to a favorite client along with a note about what you've enjoyed in it (e.g., "I especially loved Chapter 7!")  Doing so will build relationships with your clients, and they will appreciate your ongoing investment in your business expertise.

 

Pay attention when talking to clients or contacts to get clues about what topics they’re interested in. For example, if a long-time client mentions he struggles with analytics, that’s the perfect cue for you to send him your favorite book on the subject. People notice when you pick up on their interests, and it makes for a more personalized gift.

 

Thirst for More

 

There will never, ever be a shortage of books. Every day, new ones are published, especially with the surge of self-published authors. It can be a challenge to know which ones are worth reading, and which aren’t. At the next Chamber of Commerce meeting or industry mixer you attend, ask others if they've read any good business books recently. Get recommendations from friends and colleagues. Ask your social network what to read. Join GoodReads and see what your friends are reading.  And check out the Small Business Book Awards to see what the community believes are top books for entrepreneurs and small business people.

 

Make time for reading business books, just like you make time for marketing, sales, and other components of your business. While the results may not be directly obvious, books do help you succeed as a business owner.

About the Author:

smallbiztrends
Anita Campbell

Guest Blogger

My name is Anita Campbell. I run online communities and information websites reaching over 6 million small business owners, stakeholders and entrepreneurs annually, including Small Business Trends, a daily publication about small business issues, and BizSugar.com, a small business social media site.

SBA's Disaster Loan Program Explained

By kmurray, Contributor and Moderator
Published: March 31, 2014 Updated: April 1, 2014

Did you know that in the wake of a disaster, SBA provides low-interest disaster loans to homeowners, renters, businesses of all sizes and private, nonprofit organizations? In the aftermath of hurricanes, floods, earthquakes, wildfires, tornadoes and other disasters, SBA is the primary source of money from the federal government for long-term recovery assistance.

Am I eligible?

SBA’s Disaster Loan Program is not exclusively for small businesses. These low-interest, long-term loans are available for damage to private property owned by individuals, families, businesses of all sizes and private nonprofits not fully covered by insurance.

While property owners usually have some insurance coverage, often it does not cover all losses or even the type of hazard that caused the damage. And that’s where a disaster loan comes into play.

What can I use the loan for?

There are actually a few different types of disaster loans available. SBA can provide up to $2 million in disaster assistance for businesses.  This includes loans to cover physical damage and economic injury losses. Some applicants will qualify for both an economic injury loan and a physical disaster loan.  Meanwhile, the dollar limit for the combined loans is $2 million.

Physical damage is probably what you think of first when it comes to a disaster – the more tangible damages done during a disaster. Businesses and nonprofit organizations of all sizes can apply. A physical disaster loan can address losses not fully covered by insurance and can go toward repairing or replacing:

  • Real property
  • Machinery
  • Equipment
  • Fixtures
  • Inventory
  • Leasehold improvements

Economic injury means that because of a disaster, you’re unable to meet your business obligations and pay ordinary and necessary operating expenses. So, an economic injury disaster loan (or EIDL) provides the necessary working capital (of up to $2 million) to help your small business or private nonprofit organization survive until normal operations resume after a disaster.

Renters can also apply for disaster loans of up to $40,000 to repair or replace their disaster damaged personal property (like furniture, rugs, clothing, appliances—anything damaged by the disaster).  Homeowners may borrow up to $200,000 to repair or replace disaster damaged real estate, plus an additional $40,000 to cover personal property losses.

How does the process work?

  • After a presidential disaster declaration, first register with FEMA. In most cases, you'll be referred to SBA for possible loan assistance. Then you should apply online, which is the fastest way to receive a decision about your loan eligibility.
  • Your loan processing is next. SBA will conduct a credit check and an onsite inspection to determine your losses. A loan officer will work with you to approve or decline a loan.
  • Generally, within five days of signing SBA’s loan closing documents, your first disbursement is made. A case manager will work with you to meet all your loan conditions and schedule the rest of your disbursements until you receive the full loan amount.

So when disaster strikes, remember that SBA is here to help. Check out this short video to learn more about how, and get more details here about the disaster assistance program.

About the Author:

kmurray
Katie Murray

Contributor and Moderator

I am an author and moderator for the the SBA.gov Community. I'll share useful information for your entrepreneurial endeavors and help point you in the right direction to find other resources for your small business needs. Thanks for joining our online community here at SBA.gov!

10 Ways to Maximize Your Home Office for Productivity

By smallbiztrends, Guest Blogger
Published: March 6, 2014

If you run one of the 14+ million home-based small businesses in the United States, congratulations. You’ve got lower overhead, a shorter commute and the opportunity to be more productive than your office-based competitors.

 

Still, working from home isn’t all eating peanut butter out of the jar and wearing your fuzzy slippers. There are plenty of pitfalls that can distract you from getting your work done. Here we look at 10 ways to ensure you’re set up for success in your home office.

 

1. Carve Out a Workspace

 

Not every entrepreneur is fortunate enough to have a spare room to turn into an office. That’s okay. You can use part of a room separated by a curtain or even a closet. The point here is to ensure you have a dedicated space that is only for work.

 

2. Set Up Your Day

 

The more routines you have, the more you’ll get done. If you have small children at home with you while you work, plan to work when they nap or when they’re quiet; otherwise you won’t be productive. Plan out your work hours; they don’t have to be 9 to 5, but they should be fairly consistent. Also, consider your attire. Some people love working in pajamas or sweats. Other people (like me) get more done by getting dressed in “business casual” – for some reason getting dressed to be seen by the world makes me feel more professional, even if it’s just me.  

 

3. Figure Out When You Work Best

 

Part of those routines you need to set up involve determining when you’re most productive. Some people are night owls, and some are early birds. Some need quiet time without phones and instant messages, so getting up early avoids that. You might need complete quiet in your home office. Whatever your needs, don’t fight against them.

 

4. Have an Ergonomic Set Up

 

You need a comfortable chair with good back support, a decent computer monitor you can easily see and a keyboard at the right height to avoid awkward pressure on arms and wrists. Don’t forget your eyes. Your computer should be at the right distance to see without strain; if necessary, see your eye doctor for “computer glasses” that are made for viewing a computer properly. Two monitors also can help productivity (less time spent jumping between applications), so if you can afford an extra monitor, by all means try it out.

 

5. Use Smart Tools

 

There are so many free or affordable software programs and apps for small businesses! Find the ones that help you do more. A few options:

 

6. Remove Distractions

It can be tempting to fold the laundry that’s in the middle of the floor, but pretend you’re at an office and ignore it. It’s important to designate certain hours for work, and certain hours for home life. Occasionally, it’s fine to take a break and run an errand, but don’t let it encourage you to procrastinate on a project.

 

7. Get Out of the House

 

Many people can’t bear being alone all the time in their home offices. Fortunately, we’ve become a mobile society, and you’ll always see plenty of people at your local coffee shop working on their laptops. Get a change of environment. Try working from a park or restaurant, if you can be productive there.

 

8. Find Support in Person or Online

 

It can be nice to meet other home-based entrepreneurs too. Find a local meetup of people like you or a local event where you can share your stories and find support in your small business endeavors. If you spend any time on Twitter or other social media sites, you’ll find plenty of folks who, like you, are working out of their homes. #HomeBiz is a great hashtag to follow to find content and conversations geared toward people like you.

 

9. Keep Learning

 

Find as many opportunities as you can to develop your business and industry knowledge. This can come in the form of online webinars, Twitter chats, in-person conferences, seminars, books, blogs and magazines.

 

10. Meet Regularly With Staff

If you have employees who also work from their homes, make a point to meet once a week or month so you reap the benefits of face-to-face time. While it’s completely possible to work virtually, nothing can make up for that in-person relationship-building time.

About the Author:

smallbiztrends
Anita Campbell

Guest Blogger

My name is Anita Campbell. I run online communities and information websites reaching over 6 million small business owners, stakeholders and entrepreneurs annually, including Small Business Trends, a daily publication about small business issues, and BizSugar.com, a small business social media site.

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