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Bartering to Cut Taxes

by thunderbird
7 replies
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I have a friend who performs various internet marketing services in exchange for services and products instead of money. He says it is based on fair market value rather than break-even cost for himself and those the barters with.
  • Profile picture of the author AprilCT
    I'm no accountant or lawyer, but my first thought would be there is probably something taxable about that. Then again, is there anything that isn't taxable?
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    • Profile picture of the author Alexa Smith
      Banned
      Certainly many organized/semi-organized "bartering schemes", in many countries, have eventually been crushed on the rocks of tax investigations/problems/prosecutions. I suspect that people sometimes do this successfully by leaving no visible traces of it which can be reported to or seen by tax departments ...
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  • Profile picture of the author thunderbird
    It is true that the Illooterati want ownership of everyone and everything via shackling them to currency and the governments they own punish actual practice of "trade" as it originally meant. That said, it is indeed easier to leave no traces for bartering since it leaves fewer traceable trails, as Alexa suggested. I don't actually know the mechanics of their bartering practices. Perhaps they don't delete anything at all. The word "tax" was not even mentioned to me, so I was guessing. At the very least that'll help them avoid paying undeserving fees to banks, credit card companies, and other thieving and looting entities.
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  • Profile picture of the author seasoned
    The IS in the US says it is ILLEGAL to barter unless you pay them tax based on the market value of the goods traded! Of course, it IS generally hard to track. That doesn't stop them though.

    Interesting note, NOT to be religious! There is a section where jesus was asked if taxes should be paid. Jesus told them to look at a coin. They DID, and it had a picture of ceaser. And Jesus said "Then render onto ceaser that which is ceasers". It could be argued that this means that taxes are to be paid on money. So it could be used to argue that bartering should be free from tax. Of course, jesus couldn't say anything against the idea of taxes, since that would draw even MORE ire, but it is clear that they ALL hated tax collection agents.

    Steve
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    • Profile picture of the author Joe Mobley
      Topic 420 - Bartering Income
      Bartering occurs when you exchange goods or services without exchanging money. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services. You must include in gross income in the year of receipt the fair market value of goods and services received in exchange for goods or services you provide or may provide under the bartering arrangement.

      Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business or Form 1040, Schedule C-EZ (PDF), Net Profit from Business. If you failed to report this income, correct your return by filing a Form 1040X (PDF). Refer to Topic 308 for amended return information.

      A barter exchange or barter club is any organization with members or clients or persons who contract with each other (or with the barter exchange) to jointly trade or barter property or services. The term does not include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis.

      The Internet has provided a medium for new growth in the bartering exchange industry. This growth prompts the following reminder: Barter exchanges are required to file Form 1099-B (PDF), Proceeds From Broker and Barter Exchange Transactions for all transactions unless they meet certain exceptions. Refer to Bartering in Publication 525, Taxable and Nontaxable Income, and the Form 1099-B Instructions for additional information on this subject. Persons who do not contract a barter exchange but who trade services are not required to file Form 1099-B. However, they may be required to file Form 1099-MISC (PDF). If you are in a business or trade, you may be able to deduct certain costs you incurred to perform the work that was bartered. If you exchanged property or services through a barter exchange, you should receive a Form 1099*B. The IRS also will receive the same information.

      Please refer to our Bartering Tax Center page for more information on bartering income and bartering exchanges.

      If you receive income from bartering, you may be required to make estimated tax payments. Refer to Publication 525, Taxable and Nontaxable Income, for additional information.

      More Tax Topic Categories
      Page Last Reviewed or Updated: January 04, 2013

      Tax Topics - Topic 420 Bartering Income

      Joe Mobley
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  • Profile picture of the author It Should Be Easy
    You need to look into your incorporation possibilities in your partiular state, especially S corporations.
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    • Profile picture of the author seasoned
      Originally Posted by It Should Be Easy View Post

      You need to look into your incorporation possibilities in your partiular state, especially S corporations.
      Corporations are subject to the same laws. They have to handle barter the SAME way! In fact, corporations, if they are smart, want to follow SOX. and that requires accurate bookkeeping of such things, and LIMITS! For a meal or gift, for example, you are limited to like $50, IIRC. That is ****NOT**** dollar value, but FAIR or RETAIL value! So if someone somehow gives you a bottle of wine worth $100 for FREE, and you give it to a customer or vendor, that is a violation. The original purpose was to prevent things like what a major company once did of giving large benefits to a purchaser at a large company to get sales. The sale mmay have been the worst deal for the company, but the purchaser wanted to keep the gifts coming.

      Steve
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