Tax Topic #420 |
2008 Tax Year |
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. The fair market value of goods and services
received in exchange for goods or services you provide must be included in
income in the year received.
Generally, you report this income on Form 1040, Schedule C (PDF), Profit
or Loss from Business. If you failed to report this income, correct your
return by filing a Form 1040X. Refer to Topic 308 for Amended Return
information.
A barter exchange or barter club is any person or organization with members
or clients that 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 for all transactions unless certain exceptions
are met. Refer to Barter Exchanges for additional information on this subject.
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 (PDF), Proceeds From Broker and Barter Exchange Transactions.
The IRS also will receive the same information.
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.
Page Last Reviewed or Updated: December 22, 2008
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