Do You Run A Small Business That Accepts Crypto?

Small Businesses Can Now Bypass Complicated GAAP Rules



Many US companies that deal with cryptocurrencies are privately held small businesses. Such businesses do not have to follow cumbersome GAAP crypto accounting rules that publicly traded companies have to follow. These businesses can follow a much simpler system for accounting: tax basis.

The tax basis method of accounting is simple to implement, closely follows IRS guidelines, and offers more flexibility to small businesses.

If you run a small business or a startup that accepts cryptocurrencies as a form of payment, primarily, there are two situations where you will have to report income on your books under the tax basis of accounting: (1) at the time you sell your product and receive cryptocurrency and (2) when you subsequently convert those cryptocurrencies into fiat currency (or another cryptocurrency).

As an example, let’s say Satoshi’s Sandwiches store receives 1 BTC on January 2, 2020 for selling several delicious sandwiches to a customer. One bitcoin is worth $9,000 on this day. At the end of each month, Satoshi’s Sandwiches cashes out BTC for good old fashioned dollars. Assume 1 BTC is worth $10,000 on January 31, 2020. For the month ending January 31, 2020, Satoshi’s Sandwiches should recognize $10,000 ($9,000 + ($10,000-$9,000)) of ordinary income.

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Source: Forbes

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