Friday, May 20, 2011

Bartering and the IRS

Bartering is making a comeback. The current economic condition has a lot to do with it. The number of questions I field on bartering in a year would be covered by the number of fingers on one hand with fingers to spare until this year.

Certain bartering is not taxable or reportable income. Incidental exchanges, such as carpooling or buying someone lunch is not a real barter transaction. Even if you and a friend go to lunch once a week and take turns paying the bill, there is no obligation for either to continue picking up the tab. Giving a neighbor a hand once in a while is also not bartering.

The kind of bartering the IRS is interested in is commercial in nature. Example: I prepare your taxes without a fee if you clip my lawn. The value of the preparation is reportable income. Barter exchanges are growing in popularity and are required to issue an 1099-B to members that barter through the club. Any exchange of services of a business nature is bartering and reportable income.

Bartering income is reported on Schedule C for most taxpayers. You may have expenses to reduce the profit subject to income and self-employment taxes.

Bartering is fun and rewarding. Remember to observe all tax laws so it remains an enjoyable pastime.

No comments:

Post a Comment