Soon, they might not even be paid the same kind of money.
A number of companies are designing payment platforms and cryptocurrencies specifically for the sharing economy, which they say is in need of a more fair and efficient path to compensation.
What’s more, they say, the sharing economy might end up serving as an experiment for adapting digital tokens as a chief form of payment.
These companies have a tough case to make: that workers should trust their livelihood to the nascent and unpredictable sphere of cryptocurrencies.
“Payments using cryptocurrency made to independent contractors are taxable. “
Beyond volatility, people will also have to convert their cryptocurrencies into cash to use their earnings since, of course, most establishments don’t accept bitcoin. That means paying unpredictable transactions fees and, since the IRS considers cryptocurrencies a property, paying taxes at their capital gains rate each time they use their bitcoins or ripples.
They’ll also, of course, still have to pay income tax — after some math. “A taxpayer who receives cryptocurrency as payment for goods or services must, in computing gross income, include the fair market value of the cryptocurrency, measured in U.S. dollars, as of the date that the cryptocurrency was received,” said Selva Ozelli, a CPA and lawyer who writes about cryptocurrencies.
Employers, for their part, should also brace for headaches.
“Payments using cryptocurrency made to independent contractors are taxable,” Ozelli said.
These employers must issue a 1099 to their contractors. But “an employer can’t enter 1,000 Bitcoin on IRS Forms 1099,” she said.
Instead, they must value the payment in dollars (at the time of payment). Some companies convert fiat currency into digital coins for employers – although they charge fees to do this.
Sharing economy workers, also known as “gig” workers, are often in financially uncertain situations to begin with, and paychecks in bitcoin will make life more risky for them, said Niam Yaraghi, assistant professor at the University of Connecticut’s business school and co-author of a recent report on the sharing economy.
“If I say this year I’m spending one-tenth of a bitcoin on office supplies, how much will I be spending next year in bitcoin?” said Yaraghi. “I don’t think there’s anyone in the world who can answer that question. It’s very, very dangerous.”
Others argue that the transparency of the blockchain technology, the speediness of digital payments along with the potential to circumvent traditional banking and processing fees offer to help the gig economy.
“Technology has emerged in the last couple of years, including blockchain and cryptocurrencies, that could in principle take the platform out of the business of payment processing and disbursement and enable peer-to-peer payments,” said Saif Benjaafar, director of the Initiative on the Sharing Economy at the University of Minnesota. “This could be a win-win for workers and the platforms.”
One in every two freelancers had trouble getting compensated in 2014, according to a survey by the Freelancer’s Union. These workers report waiting nearly 100 days to receive payment for their services or never getting paid at all.
These problems are likely to come to a head as more people make their living outside of cubicles. The money flowing through the sharing economy is expected to mushroom to $335 billion by 2025 from $14 billion in 2014 , according to the Brookings Institution.
There’s no way to quantify yet how many independent contractors are paid in cryptocurrencies, but the share is likely small. Still, experts say it’s unsurprising the two quickly growing trends – the sharing economy and digital money – have intersected.
David Chin, CEO of Thor Token, believes blockchain can solve many of the payment issues plaguing the gig economy…