Yesterday was Mother’s day, so I headed over to my mom’s place with my wife and my dog, and was happy to hear some good news. My parents have traded services with a very good neighbor!
My parents have a great deck set up in the backyard but our family moved into the house 18 years so some of the wood is rotting. At the same time my mom owns a bad ass carpet cleaner (well as bad ass as a carpet cleaner can be). While I am not exactly sure how the conversations came about, I do know that this neighbor is replacing some of the wood panels in the deck and my mom is heading over to their place to shampoo the carpets. Good stuff!
As always we have Wikipedia to give a simple definition
Bartering is a medium in which goods or services are directly exchanged for other goods and/or services, without the use of money.It can be bilateral or multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, when the currency is unstable and devalued by hyperinflation. Bartering is still common in the present, usually used within the Internet on sites like Craigslist.
Bartering Taxation and the IRS
My Journey what are you doing? You are really going to talk about the tax implications of bartering? Bartering has been around since one caveman said to another, “Hey fix my cave’s leaky roof and I will grab you a piece of a saber tooth.”
Considering it likely that no one reading this blog will ever file the requisite forms mainly because it seems ridiculous, I am not going to go that deep.
As the IRS indicates in their report, “Tax Responsibilities of Barter Participants”,
If you engage in barter transactions you may have tax responsibilities. You may be subject to liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.
Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter – barter for another’s products or services – you will have to report the fair market value of the products or services you received on your tax return.
Reporting Bartering Proceeds
If you barter your products or services through a barter exchange, you should receive a Form 1099-B, “Proceeds from Broker and Barter Exchange Transactions.” The amount shown in 1099-B Box 3 “Bartering” is your barter transactions proceeds and is generally reportable as income and must be included on your tax return. Barter exchanges have an annual obligation to report your bartering proceeds to the IRS.
Generally, you report this type of business income on Form 1040, Schedule C Profit or Loss from Business (PDF), or other business returns such as Form 1065 for Partnerships (PDF), Form 1120 for Corporations (PDF), or Form 1120-S for Small Business Corporations (PDF).
The reason “kind of” makes sense. Lets take an easy example,ME. My boss would not give me salary but rather barter for my needs.
Real Life Bartering
Regardless of the boring tax stuff, I have yet to be in a situation of true bartering. I have done (and will continue to do) favors for people, but I can’t recall a situation where it was a direct bartering situation.
Do you have any success with bartering? Any examples? I’d love to hear about them,