Hi. I need/want pay my employees with a cryptocurrency (ETH). It's very confusing to find a legal way to do it. how can I do ?

[py2082]

I want my salary get those ETH as a legal salary and deduct taxes on it.

[ToddL99]

You can pay your employees with cryptocurrency, but the process will be far from simple and may be risky. 

From TurboTax Tax Tips for Bitcoin and Virtual Currency:

"If you are an employer paying with Bitcoin, you must report employee earnings to the IRS on W-2 forms.

• You must convert the Bitcoin value to U.S. dollars as of the date each payment is made and keep careful records.
• Wages paid in virtual currency are subject to withholding to the same extent as dollar wages.

Employees must report their total W-2 wages in dollars, even if earned as Bitcoin. 

Self-employed individuals with Bitcoin gains or losses from sales transactions also must convert the virtual currency to dollars as of the day received, and report the figures on their tax returns."

Risks of paying with cryptocurrency from Can You Pay Your Employees in Cryptocurrency?

"While some employees may want to be paid in full or partly in cryptocurrency, the simple truth is that in the U.S. it would be quite risky to do so.

The IRS considers bitcoin and other cryptocurrencies to be property, meaning not money.  According to TurboTax, employers who pay wages in cryptocurrency must convert the crypto to U.S. dollars for purposes of tax reporting. This would likely be a huge hassle for most businesses.

Another hurdle is the Fair Labor Standards Act, which governs most aspects of employee rights. It states that employees must be paid in “cash or negotiable instrument payable at par.”

There is no case law on the subject yet, but for now it’s likely that the Department of Labor may not consider cryptocurrency to be the same as a fiat currency. The Labor Department could then also determine that an employer failed to pay their employees a minimum wage.

[py2082]

... thanks for your answer.

And if I give this cryptocurrency as a gift/bonus to my employee, do we still have to pay taxe on it ?

I give the regular salary on Fiat currency, and I add a bonus on cryptocurrency. So, my employee will have two lines on is pay stub.   

If I can do that, how much taxes should i deduce on this bonus ? 

I just want give away cryptocurrency we got after selling arts. I was believing a salary on cryptocurrency will be the easiest way, maybe a bonus... but not really

If I don't declare we gave those cryptocurrencies to my employees, they won't be able to declare they have cryptocurrency.

Thanks for your help   

[ToddL99]

As employees, any payment you give them as compensation for services is subject to the same rules as their normal payroll.

Income, Social Security, and Medicare taxes must be withheld and reported. All payments (wages, bonuses, taxes, other withholdings, etc.) must be reported in US dollars.

You cannot "add" a separate line for cryptocurrency payments - all  payments must be reported in US dollars. 

In order to pay your employees in cryptocurrency, you would first have to pay them in $$$ and then "exchange" (sell?)  them cryptocurrency for all or a portion of their dollar-denominated net payroll. Depending on the cost basis of the cryptocurrency at the time you exchange it for payroll $$$,  it may result in a taxable event for your business.

[Opus 17]

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@py2082 wrote:

... thanks for your answer.

And if I give this cryptocurrency as a gift/bonus to my employee, do we still have to pay taxe on it ?

I give the regular salary on Fiat currency, and I add a bonus on cryptocurrency. So, my employee will have two lines on is pay stub.   

If I can do that, how much taxes should i deduce on this bonus ? 

I just want give away cryptocurrency we got after selling arts. I was believing a salary on cryptocurrency will be the easiest way, maybe a bonus... but not really

If I don't declare we gave those cryptocurrencies to my employees, they won't be able to declare they have cryptocurrency.

Thanks for your help   

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The bonus, no matter how you pay it, must be reported on their W-2 in box 1, 3 and 5 along with their other taxable wages, and is subject to withholding for state and local income tax, social security and medicare tax, and any other state or federal requirements, such as unemployment, workers comp, or anything else that is based on the salary you pay.

You can create a separate line on the pay stub if you like, but the payment is still subject to all the regular withholding rules and must be reported on their W-2 (as well as form 941 and any similar state forms).  (Example: when my wife's mother died, her employer gave her a gift card to purchase food or flowers for the memorial service.  The value of the gift card was duly included on her pay stub, and the appropriate taxes were withheld in addition to her regular salary.)

If you pay the bonus in anything other than cash (including merchandise, barter, or cryptocurrency) then the value that must be reported and withheld from is the fair market value on the date the bonus is paid.