Bitcoin Tax Refunds? Pros & Cons

BitcoinPatriot-Made Audio interviews Alex McAdams, listen here. Alex is from  from Nerdwallet and he talks about the pros and cons of digital currency alternatives, such as BitCoin.

A recent Forbes Magazine article further supports McAdams statements in our interview: “Nearly one-third of the U.S. population (106 million people) are either underbanked or unbanked, according to the Federal Deposit Insurance Corporation (FDIC). That means they don’t have bank accounts or regularly make non-bank financial transactions. One in five households has zero or negative assets. Twenty-five million have no credit score, which makes them invisible to the mainstream U.S. financial system.”

Why is this a problem? Well for one thing people can’t get their tax refunds electronically deposited. They often have to drive around town looking for someone  to accept and cash their IRS tax refund checks. The poor are then charged extra fees to simply cash these IRS refund checks.  And, because they have no credit score they can’t get access to financial services, which is usually necessary to buy a home, build a business, or send a child to college. A car can’t even be rented, if it is needed.

But what exactly is Bitcoin? What’s it for, and why is it useful? Who is actually using Bitcoin? “What are the pros and cons to using a virtual currency like Bitcoin?”

Wikipedia states; “Bitcoin is an online payment system invented by Satoshi Nakamoto, who published his invention in 2008, and released it as open-source software in 2009.  The system is a peer-to-peer currency where users can transact directly without needing an intermediary. Transactions are verified by network nodes and recorded in a public distributed ledger called the block chain. The ledger uses its own unit of account, also called bitcoin. The system works without a central repository or single administrator, which has led the US Treasury to categorize it as a decentralized virtual currency.  Bitcoin is more correctly described as the first decentralized digital currency. It is the largest of its kind in terms of total market value”


Due to its relative infancy, buying and using Bitcoin is not as easy as it could (and should) be.   Bitcoin is by no means a replacement for checking accounts or credit cards,  at least for now.

The largest problem Bitcoin faces is its volatility. With fluctuations that can ranges hundreds of dollars in just hours, the value of an individual’s bitcoins can quickly soar or be destroyed. With a fluctuating value, the funds can either help or hurt the company. This fluctuation of inflation can be a boon to business, unless the market is valuing the coins insanely high, sometimes reaching $1000!  Moving from traditional currency such as the dollar into Bitcoin is risky, and one shouldn’t overexpose oneself.

The U.S. Senate recently held hearings to discuss the legitimacy of the virtual currency. Former Federal Reserve chairman Alan Greenspan declared it a bubble, while Ron Paul, the former congressman and presidential candidate, suggested it could bring the downfall of the dollar.

Bitcoin is still in its infancy, and as with any nascent technology, there are likely to be some growing pains on the way to mainstream adoption.



Virtually every payment you make,  whether with a credit or debit card, by check, or via online transfer, relies on proprietary infrastructure controlled by large financial institutions (such as banks) and payment processors (such as Western Union or Visa). This creates two problems:

1. Different payment systems are incompatible

Because every processor uses its own technology, getting these systems to work together can be difficult and expensive. Just ask someone who has transferred money internationally or tried to make a same-day payment to someone at a different bank. These transactions are not impossible, of course, but the downsides to having multiple competing payment technologies are readily apparent.

2. Proprietary systems create extra cost

Because large, entrenched institutions are often the exclusive owners of the payments infrastructure, they can charge a lot to use it. For consumers, it means extra fees on wire transfers, money orders, and check processing fees ( even your tax refund checks). And, for merchants, it means paying a hefty fee on credit-card transactions.

Bottom line: If the big financial corporations own the wires that send and receive money, then they can charge you a lot of money to use them. You have no control over what they charge you.

Digital CoinFor certain transactions, Bitcoin appears to be cheaper and better than the alternatives. Here are three examples of when using Bitcoin might make sense:

Sending money internationally

One could use Western Union to wire them money for the purchases. But if you want to send $100,  your was slapped with a minimum fee of $5 (going as high as $25, depending on the payment method and location), not to mention Western Union’s often less-than-favorable exchange rate, which further added to the cost.

Today, you can use Bitcoin to send family and friends  money. With 1 percent conversion fees on either side, that adds up to about $2 in fees for a $100 purchase.  The best part is, instead of taking three to five days, my transaction is processed in only about 10 minutes.

Buying coffee

Credit-card transactions are costly. Even though technologies like Square have made it easier to accept cards, it still costs merchants 2 to 3 percent per sale to let customers pay with plastic. As a result, these merchants often pass the cost onto their customers, or sometimes accept only cash.  Bitcoin helps tackle the problem not only by lowering the transaction fee, but also by splitting it between the customer and the merchant. For merchants, that means dropping their fee to 1 percent and improving their bottom line. For consumers, it means faster payments than cash and not having to hunt for your bank’s nearest ATM (or paying $3.50 to use whatever’s closest).

Splitting the check

If you are going go out to eat with friends, and there’s always an awkward pause when the bill comes. If we’re lucky, the restaurant lets you split the bill four ways. Otherwise, you have to ask the server to break a bunch of twenties or figure out between everyone who’s paying how much now and who will have to get it the next time.  With Bitcoin, one person picks up the whole check and the rest of us pay her our portion of the meal right there from our phones. It’s faster, cleaner, and a lot less cumbersome.

An increasing number of businesses now accept Bitcoin. In just the past few weeks alone, companies as diverse and, both online retailers; OKCupid, a dating site; and the Sacramento Kings basketball team said their customers could start using Bitcoin.  And, the first university in Canada has installed a Bitcoin ATM!  Simon Fraser University in Vancouver, Canada is the first major academic institution in the world to install bitcoin ATMs on campus.

Does The Future of Currency = Me Currency?

A secondary type of cryptocurrency is appearing. A fragmentation of money, so to speak. A programmer can piggyback on the bitcoin code, customize it, and within a day give you your own currency.  There are around 70 cryptocurrencies currently being traded in reasonable quantities. At the moment, most have tinkered around with bitcoin to offer some kind of additional edge. Litecoins offer faster transactions. Worldcoins, designed with a small total cap, promise to appreciate over time. Anoncoin claims to be more anonymous (obviously) and Stablecoin to have “military-grade” encryption.  Devcoins are used by open-source developers. Peercoin are used by those who desire, in their eyes, a more equitable way of sharing out the currency in the first place (bitcoin is notoriously unequal, a few big miners and early adopters hold the majority of bitcoin wealth).  Coinye Wests will be for gigs and music. These new cryptocurrencies are being used as a way of affiliating with a group, community, interest or set of principles. Using dogecoins, which sport no particular advantage over bitcoins at all, is most directly a cultural rather than a financial decision.

 How can I get Bitcoins?

Learn more about Bitcoin by researching some of the useful resources, keep up to date on it’s latest valuation here and see who is taking Bitcoins through this virtual map that drills down to your local area.   And,, is a website backed and maintained by the bitcoin core developers, offers a great Getting Started Guide on how to get up and running with bitcoin.

For most people located in the US, is the easiest way to start using bitcoin. Coinbase allows you to buy bitcoin directly from your bank account, store your coins in an online wallet (similar to a bank account), and pay using bitcoin for a large number of merchants (including 










This post is written by Alice M. Fisher


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