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Four Things You Should Know if You Barter

3/5/2014

 
Bartering is the trading of one product or service for another.  Often there is no exchange of cash.  Small businesses sometimes barter to get products or services they need.  For example, a plumber might trade plumbing work with a dentist for dental services.

If you barter, you should know that the value of products or services from bartering is taxable income.

Here are four facts about bartering:

1.  Barter exchanges  A barter exchange is an organized marketplace where members barter products or services.  Some exchanges operate out of an office and others over the Internet.  All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions.  The exchange must give a copy of the form to its members who barter and file a copy with the IRS.

2.  Bartering income  Barter and trade dollars are the same as real dollars for tax purposes and must be reported on a tax return.  Both parties must report as income the fair market value of the product or service they get.

3.  Tax implications  Bartering is taxable in the year it occurs.  The tax rules may vary based on the type of bartering that takes place.  Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.

4.  Reporting rules  How you report bartering on a tax return varies.  If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business.

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          • Adoption
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          • Educational Expenses
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        • Other Business Topics
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      • Amended Returns
      • IRS Notices and Problems
      • Tax Plan >
        • All About the Earned Income Tax Credit
        • 5 IRS Audit Red Flags
        • Retirement Plans for Sole Proprietors
        • Are You Claiming All of Your Tax-Deductable Business Expenses for 2015?
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        • Do You Need to File Form 1099s?
        • How to File an Appeal with the IRS
        • Why You Might Get a Letter from the IRS, and What to Do
        • How to File an Amended Tax Return
        • Should You Claim the Home Office Deduction?
        • How to Avoid -- And Deal with -- Identify Theft
        • Q & A: IRS Audits
        • Are You Using the Right Business Structure?
        • Starting Planning for 2015 Income Taxes Now: 5 Tips
        • What You Need to Know About Estimated Taxes
        • Contractor or Employee? How the Income Tax Obligations Differ
        • The New Form 1095-A: Reporting Health Insurance Coverage
        • Are Your Social Security Payments Taxable?
        • Do You Qualify for the Earned Income Tax Credit?
        • Are You Eligible for Health Insurance Tax Credits
        • Employee Retirement Plans - Tax Advantages and Other Benefits
        • 5 Business Tax Credits You May Be Missing
        • New Business in 2012
        • Is it a Bad Debt or a Simple Revenue Loss? Telling the Difference
        • Business Taxes Add Complexity: How Will This Affect You?
      • Tax Scams