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Show HN: Dead simple Bitcoin payroll
30 points by codelitt on June 19, 2014 | hide | past | web | favorite | 39 comments
Hey everyone! We're the folks from Codelitt Incubator. We pay several of our employees either entirely or partially in BTC. This is a huge pain every month when we run payroll. Normally it consists of a wire to Bitstamp (which includes a steep fee), buying the BTC on Bitstamp, sending to our company wallet, collecting receiving addresses, and then paying our employees. Because of this we're building a dead simple BTC Payroll.

Our main goal is to make it easy for you to request that your employer pays you in BTC (partially or completely).

We don't hold any money nor Bitcoins. It all happens in real time. Security, simplicity, and user control are our main priorities.

Employers - Sign up, verify bank account, add employees/contractors name and email, and choose date to run payroll (if you opt in for automatic payroll. Also an option to run manually).

Employees/contractors - Receive email after your employer adds you, setup account with bank account/BTC receiving address, and how much of your paycheck you want in USD or BTC.

Incoin.io (that's us) - We ACH debit company bank account, purchase necessary BTC, then credit employees/contractors with USD or BTC depending on how they choose. We'll maintain records so that when tax season rolls around, you're all covered.<p>We would love some feedback. What are your questions? What are your concerns? Are there any cryptocoins besides BTC that are of any interest?

We are very close to launching our beta. We're looking for some companies who would like to participate in our beta. You can sign up here for beta access or just to be alerted when we launch (very soon.) We'll open it up quickly though after that. You can sign up here: https://www.incoin.io/

How are you handling payroll withholding? Nearly every major nation has some equivalent of this. What about income tax withholding for cross border payments?

These are issues that even the most basic payroll services offer today (i.e., handling the actual withholding/deductions and remitting the proper amounts to the relevant tax authorities, not just keeping records). If you're not addressing the tax issues, you're product isn't dead simple--it actually increases the complexity of paying employees dramatically. Withholding taxes, for example, are due at least quarterly; payroll taxes are usually due at least monthly.

That's a great question — and that is one of the first issues (alongside bitcoin) that we want to get right.

Garnishments, withholdings, and taxes vary state to state, and sometimes city by city. We're working with our tax lawyers and accountants to make this all seamless, but it's a real pain. We're looking to launch in potentially three states at first — just to make things easy.

Right now the reporting and payments are manual — we notify the company how much is owed in taxes etc. and they must pay the government themselves.

We're looking to simplify this further, though, and debit the money for garnishments to pay the government on behalf of employers where possible.

In finance, being subject to holding a currency you don't want to hold and prefer to change, is called Foreign Exchange Risk [1].

Why would a reasonable person want that ? Even If I believe in Bitcoin, I'd prefer getting paid in USD and choose to invest in Bitcoin.

[1] http://en.wikipedia.org/wiki/Foreign_exchange_risk

We're using this internally right now, and that's a risk we wanted to mitigate for ourselves. Pretty sure that no-one wants to assume this risk.

The companies that use our service don't own or transact in Bitcoin. Wages are specified and debited in USD — we then purchase Bitcoin and transfer it to the employees. This effectively mitigates any risk from the companies.

For employees our main feature right now is that they can manage how much they want in Bitcoin/USD — every month — and manage the risks themselves. Also, one of our employees requested an "average bitcoin price", which helps to mitigate any risk on the employees side (https://news.ycombinator.com/item?id=7916822)

I see. Than I still don't understand what you\ your employers benefit from paying in Bitcoin ?

Unless your USD-->Bitcoin (and the other way round) transaction costs are lower than the average joe's, why would I prefer being paid that why ? Even if you cover the transaction costs I'd still prefer to be paid in USD and that you'd pay me the additional transaction costs instead of converting USD to bitcoin on my behalf.

Unless it's a finance backdoor in terms of tax, etc, I can't see the reason in doing it.

I still can't get why is this a good idea.

As a finance tech worker, I know that All Import/Export companies are so afraid of the forex risk that they are willing to pay someone to take care of the risk. Usually they either buy options or forwards to fix the exchange rate ahead of time.

So unless your base currency is BTC all the way, I still can't understand why anyone would do it.

If you don't live in the same country in whihch your company is based they still need a way to wire you the money. The average international transfer fee is around 8% [1]. So the 4% or so fee from Bitstamp doesn't seem that bad. You probably still need a way to convert it back to fiat, but still...

[1] https://remittanceprices.worldbank.org/en Sorry, the data is somewhere around there, but I can't point to the specificdocument right now.

Congrats for given this a go, good job. The only hesitation is of course is payroll tax reporting. This is something you must be able to do for an employer or really your service is of little value, due to assessed penalties of non and/or late filings. I would suggest taking one State at time such as CA, as soon, it appears cryptos will be legal tender and figure out how to do all necessary payroll activities, such as tax reporting to State/Feds, wage garnishment, etc., once you have this, then you've got something. I wish you good luck in your endeavors!

Thanks for the support. And you're correct. We answered a bit about us. We're going to start simply with 1-3 states and then build out as we go.


What is the main advantage over getting paid in USD and buying bitcoins on your own? Other than promoting bitcoin.

Hey! I'm working on this project too.

You have a great question. One of the features that we're looking to implement is "average bitcoin rate", where employees get paid an average rate for their paycheck's work; this could heavily decrease variance and soften drops in Bitcoin's price. Right now it's just an idea in the pipeline — we really need to test demand and see if people would actually use it.

That's nice. But you didn't really answer the question.

not everyone lives in the USA

This. Also it simplifies things. If you get paid in USD, then you still pay the transfer fees to get bitcoin. It's more manual than just receiving part or all of your paycheck in BTC every month.

Looks nice! I like the B logo.

I've also seen Bitwage [1] doing something similar to this and heard that people like them.

[1]: http://bitwage.co/

Ya! We've seen them, but we haven't been able to use their site yet.

Out of curiosity, what do your BTC-paid employees do with the BTC? Are there enough BTC-accepting merchants where you are that doing a significant portion of your spending in BTC is reasonable? Are they able to buy groceries, pay rent, etc in BTC? Or do they just hope that BTC will go up and they'll make money on the exchange?

This may come off as critical, but it's not intended that way. I'm genuinely curious as to how far BTC has come as a 'real currency'.

No don't worry. It doesn't come off as critical at all. I would say its about split. Several of them buy a lot online which helps. They use it in real life occasionally, but often just change it into dollars when they need cash/local currency in their account. Some of them hold a bit of it.

A few real world examples:

Employee 1 takes a 50/50. He payed for his holiday with it because his travel agent accepts it. He splits about half of his paycheck and uses the BTC whenever possible.

Employee 2 takes 100% BTC, keeps everything in BTC and exchanges when he needs local currency, but manages to do almost everything in BTC.

Employee 3 takes a tiny percentage in BTC and just holds it as an investment.

If you're using Bitcoin as a means of payroll, you may want to look into the tax implications.

100%. We're definitely aware of the legal side, and we're working with a team of lawyers and accountants on this particular issue.

Good point.

I believe the IRS treats bitcoins as property, rather than an actual currency. But form what I've heard, when doing you're taxes, you actually just treat it as regular payroll taxes.


From what our lawyers are telling us, that's right on the money. It's treated as a barter so you pay taxes on the USD equivalent if I remember correctly.

This is correct. From a tax perspective, this brings up a lot of headaches. Let's say you get paid $5000 per quarter (to make things simple):

March 31: 25BTC (price per BTC - $200) June 30: 20BTC (price per BTC - $250) September 30: 20BTC (price per BTC - $250) December 31: 10BTC (price per BTC - $500) Total: 75BTC

Now at the end of the year you need to calculate your income. You made 75BTC over the year, each of which was purchased at a different price. When you sell them to transfer them into USD, you need to keep track of _which_ bitcoin you are selling. If you sell one on December 31st, was it one from your first paycheck (in which case you made a profit of $300, which counts as income because you didn't hold it for over a year) or from the last one?

Simply buying BTC with USD from a company's bank account and sending it somewhere isn't difficult. To actually provide a service that doesn't leave employees in a tax nightmare they have no way of understanding is really what matters.


This is exactly the same as automatically buying stock shares every month in a fixed dollar amount, and then having to figure out the profit/loss for taxation when you sell the shares. With stocks, the most straightforward approach is also to specify which shares you sold so that you can calculate their change in value accurately.

You're absolutely correct. Part of our need to build this was to enable employees to have reporting for the BTC/USD price when they were paid in it vs. when they sell. The idea is for them to make their lives more simple in this regard.

> Normally it consists of a wire to Bitstamp (which includes a steep fee)

If you mean $30-40 for the wire and 0.2% for the trade, that's not steep at all.

Try sending money abroad any other way, and you're likely to pay around 3-8%. Or much more if the destination is one of the messed up African countries.

Would you not just pay the exact same fees minus the 0.2% bitstamp fee?

I assume the 3-8% you're talking about is the exchange rate but unless the place your sending money has a good local exchange with liquidity you're going to pay that anyhow having the money sent from the exchange to you.

> Would you not just pay the exact same fees minus the 0.2% bitstamp fee?

No, because Bitstamp accepts USD, so you don't lose anything on the conversion rate (which is a crazy hidden fee that banks never mention).

Also Bitstamp has the best EUR-USD conversion rate I've seen. My bank's conversion rate is 2.5% worse than Bitstamp's, which is a huge freaking difference.

> I assume the 3-8% you're talking about is the exchange rate

For wire transfers - yes. For other means of transfer like PayPal, WesternUnion, MoneyGram there's also a huge direct fee, and a horrible conversion rate.

With our system you will just pay one fee to accomplish your end goal. The ACH debit and BTC transaction fee doesn't cost you any more. It should eliminate the 3-8% on exchanges for foreign currency, the wire transfer fees, and the BTC exchange fee. You'll just have one instead of 3. We're working to price it competitively.

True but thats not really a comparable result to be one discussed with 3-8% exchange fees. To be comparable the person on the receiving end would have to sell their bitcoin for their local currency. That would reintroduce the exchange fees.

Very true. That's why we offer employees the option choose what percentage of their paycheck to receive in BTC and USD (hope to add other currencies soon). The idea isn't to get paid in BTC and then to exchange it. We're idealists, but the idea is to get paid in BTC and use it!

clickable link - https://www.incoin.io/

Any chance of adding other coins, such as Nxt?

We want to add other coins for sure. We're going to get BTC right during the beta and then start adding other coins as we go. Maybe we could open up voting.

Is the source code Free and Open Source Software?

Unfortunately not right now. We're looking at this from a startup's point of view, and putting our SaaS code on github isn't something we're looking ATM. We will be work on releasing an API for others to use.

That's very unfortunate. With the revelations of Edward Snowden against the NSA, and the ability to call into questions the ethics of cloud computing and their providers, startup cloud companies that don't provide their software code under a copyleft license won't do well in the long term, I suspect.

The fact that personal and financial data will be hosted on your company servers, tying names and accounts to Bitcoin transactions and wallets, all doesn't pass the smell test, if the code isn't open for inspection.

Of course, there is nothing preventing your company from putting up placebo code on Github, that doesn't actually represent what is running on your servers. I understand that, but as a show of good faith, it would do your company more in the long term by opening the code in addition to providing an API.

Anyway, good luck.

Extremely valid concerns.

We're trying to be as secure as possible — personal data is strongly encrypted in our database, we're using tokens instead of bank details to keep things more secure, we're implementing 2FA for logins, and we're using perfect forward security for SSL.

Unfortunately, though, money laundering law mandates that we need to record personal information so there's little we can do to get around the name <=> bitcoin address issue. We have ideas (like company-specific encryption for bitcoin addresses where only employers can decrypt addresses) but it's a long way out, even if we do implement it.

You're correct in stating that it's impossible to truly "verify" the source code of a website - essentially, it's a remotely hosted black box unless you have direct file access to the server. But this seems to suggest that if you can't trust a site which doesn't publish its source code, you also can't trust a site which does - that "show of good faith" means absolutely nothing.

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