Show HN: I built a website that lets you freelance for bitcoins

In what way is it really simpler than paypal or some other webwallet?

Exactly. There are countries (Ukraine, Belarus) where PayPal does not allow to withdraw funds (due to stupid local tax code and government regulation of foreign currency) but BitCoins are transferrable freely.

Actually the whole story is not about taxation. Local government wants to control and supervise all people's money. For example, for each incoming payment (wire transfer) they require a piece of paper with ink seal of the sender, date, amount, and account numbers of both parties. If any of these attributes does not match bank transaction data, then you've got a fine. Every local law in this area is made in such way that local workforce is isolated from global market, underpayed, underemployed and kept politically loyal.

So, bitcoins are a like breath of fresh air here. They bypass traditional banking system, controlled by corrupt local authorities.

I almost can't believe Wikipedia has an article on this:

http://en.wikipedia.org/wiki/Taxation_of_illegal_income_in_t...

> The Internal Revenue Code is not a mechanism for enforcing other codes of law, such as criminal law. [2] A person’s taxable income will generally be subject to the same Federal income tax rules, regardless of whether the income was obtained legally or illegally.

Also, Yale Law has a PDF entitled "Taxing Income from Unlawful Activities" (1974):

http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?artic...

> When income from unlawful activities is reported, the taxpayer often supplies his name, address, and net income (usually in round figures, with such laconic labels as "miscellaneous income" or "income from various sources") and leaves the rest of the return blank.

The whole PDF is actually a very interesting historical study of the ins and outs of taxing ill-gotten gains.

Good point. But I would argue that receiving payment in BTC makes it easier to illegally not declare the income. Now that you can pay for all kinds of products and services using BTC there's no need to convert it to another currency first. The only way to trace it would be if the employer filed a 1099, which they're still incentivized to do in order to write the payment off as a cost instead of profit.

What if you were to get paid in something really non-traditional, like goats.

i.e. - I build a fence for a farmer, and he gives me 7 goats.

What do I owe the IRS?

no

It may be the intention of the creators and users. However, in the UK at least, tax law is quite clear that you have to pay tax if you perform work in return for a "consideration", be that cash, bitcoins, donkeys, sex or music (for example).

Although the creators of laws don't always have in mind what happens online (often because they were created before the internet), most laws are broad enough that they cover new creations like bitcoins.

People & businesses have often tried to avoid paying tax by "swapping services" (e.g. accountant does developers accounts in return for a web site, and vice-versa), so the tax laws are deliberately broad to cover all "novel" non-monetary forms of payment.

Of course, you can only be found guilty of tax evasion if you are caught...

Define "intent of bitcoins".

Some people may intend to use them for that, but it seems to me the primary purpose of the creators of bitcoin was to create a currency that was not under the control of a government and subject to arbitrary currency manipulation as a result.

Creating a currency to merely avoid taxes would be a lot simpler, really. Step one is just not to not pay taxes, after all...

Also, consult your accountant/tax attorney, but AFAIK the US has very similar provisions to what RobAley is describing. Transactions not conducted in dollars occur all the time and the IRS is not left stymied by them. In that sense there's nothing particularly special about bitcoins.

In the United States, you are required to pay taxes even if you trade your services as a dentist for the services of a doctor (barter transactions are fully taxable, although some obviously fly under the IRS radar).

Every sale you make with bitcoins should in theory be subject to sales tax, and any work you do should be subject to income tax. I suppose you might even be subject to capital gains tax if the value of your bitcoins goes up (although I'm not sure if capital gains has even been tested for digital currency, gains in foreign currency values are taxed).

The only way bitcoins can enable you to not pay tax is through lying to the IRS (i.e. tax evasion, which is illegal). And, given that anonymity with bitcoins is harder than it seems, there's a good chance that you will eventually be caught if bitcoins become popular, even if the IRS is not aggressively looking at bitcoin transactions currently.

If you suddenly start making all of your income in bitcoins and don't report it to the IRS, the IRS may very well audit you, wondering how you are supporting your lifestyle without any income.

I don't know any of tax code that stipulates that you only have to pay tax on earned income paid in a certain currency.

No, the point is to have a decentralized currency. Just like the internet, it provides great freedom and stability.

Presuming that you've got them in return for doing some dev work (the subject of this article), when the tax man audits the company that you did the work for, and asks them to explain where they got the website/app/software developed when they don't have inhouse developers one of two things will happen. Either they won't give the tax man your details and invite the rath of the tax man, or more likely they will give them your details and how much was paid. You see, even if your customer keeps the transactions completely off the books, there is usually something to show for it, particularly if we are talking any kind of volume, and the tax man is very very used to looking for those kinds of signs.

> and no tax to be paid

There is tax to be paid, legally speaking, its just a question of whether or not you get caught for not paying it. Just like the tax man investigates people selling stuff on ebay, when sites like localbitcoins become more popular they will start investigating them as well. You may just find that the person you're meeting to sell your bitcoins to turns out to be a tax investigator.

AS with all criminal enterprises (a harsh label, but that's what tax avoidance is), you may get away with it. Or you may not.

It would, however, increase the quality of the offers. I'd go elsewhere if I had to make some sort of effort to hide what may as well be spam.

The idea is behind chargebacks is good, but the implementation is somewhat lacking. An example, my wife has an online shop, and (unsuprisingly) uses Paypal. A company bought an item from her. The transaction went smoothly, they paid, she shipped the item. Unfortunately, the card details they used to pay with got stolen. So they chargedback a number of transactions that has been made with this card. One of them was my wife's. Here's what my wife had to do: dispute chargeback with Paypal; get in touch with the buyer and ask the buyer to inform their bank that this transaction was legit. Then wait 6 months. Eventually she got paid back, bar the PAypal "processing fee", which wasn't a lot, but since the item was pretty cheap, it ate all the profit she made. We tried to get this paid back, but to no avail. Now, it's good that the buyer charged back accidentally and acknowledged it. But there are lots of who do this for profit, and with the broken banking/paypal customer (as in 'merchant') support system, have fun getting your money back. This is why chargebacks might be a problem.

Chargebacks and fraud are an absolutely monumental problem for most internet merchants. Especially high risk stuff like gambling and porn.

Each chargeback costs the merchant about $30 and then after so many chargebacks your credit card billing rates change. Too many chargebacks and you lose your ability to take credit cards all together.

They are more than a problem & annoyance for merchants. They are completely prohibitive to a lot of services. Chargebacks essentially mean that a merchant has no guarantee that they get to keep a payment till 6 months after it has been made. In market where goods are easily resale able, this adds significant costs in fraud and fraud prevention. My guess is 5%+ for the more vulnerable merchants. This hits smaller/new merchants disproportionately. It also raises the required skillset for being an online merchant.

To minimize fraud merchants will often refuse risky business like international orders or orders where the billing and deliver addresses don't match.

There are several interacting "margins" limiting ecommerce. Merchants not skilled enough in fraud protection. Market to fraud prone. Low margin markets where 2.5% processing fees + 2.5% fraud + 2.5% fraud prevention make it unserviceable. Move any of the boundaries and you will allow more merchants to exist.

Are they great for consumers? There are invisible effects that ultimately hurt consumers. A site may refuse to deliver to you. It may hold back shipments until the fraud checks are done. You may be paying more. A site may not exist at all because they were unable to deal with chargebacks.

escrow serves the same purpose, you confirm you are happy with the product before releasing the funds, but you cannot just claim the funds back yourself once the are in escrow, that requires the other parties agreement. What it does is even the playing field between seller and buyer, which benefits all honest parties. the current status quo is that the merchant/seller whatever takes all the risk for a potential chargeback down the line.

Yes, I know the rates in USD/GBP/EUR, and that's why I was asking. I had a quick look at odesk and the rates are lower than I would normally charge myself for the things that I do.

That's what made me curious, but your answer makes a point, but then it means people are taking a punt on the Bitcoin.

USD is far less volatile than BTC though isn't it?

You motivated me to finally install and try it. Thanks.

Also consider using the electrum client. It uses remote servers for the blockchain, so you don't need to download and sync with the network, while you keep the private keys for your wallet, so you don't need to trust a remote service: http://electrum.ecdsa.org/

It also generates new addresses deterministically from an initial seed, which you can write down and keep securely or remember in your brain, allowing you to recover your entire wallet if you lose access to your computer.

Yup. Bitcoin is meant to be anonymous.

I've seen it work on a few sites, like AnonymousAds, but yeah it's not a 1:1 mapping

You could create a login-token signed with your bitcoin private key. Wallet software would have to implement that, though.