Bartering Income
How Can It Impact Your Taxes?
Many small business owners use bartering as a way to save a little money.
But many do not realize the tax consequences associated with bartering.
When bartering occurs, there is usually no money exchanged, just goods
and/or services.
In general, you are required to issue a Form 1099-B, Proceeds from Broker
and Barter Exchange Transactions, to the party you traded with. This form
indicates the fair market value of the item you traded.
The fair market value of the item you receive is income to you and is
taxable in the year the service is received. Your bartering activities
also may result in ordinary business income, capital gains or capital
losses, or you may have a nondeductible personal loss.
In addition, the fair market value of the item you traded, may also be
deductible to the extent the barter received is a deductible expenditure.
Bartering income may result in liabilities for income tax, self-employment
tax, employment tax or excise tax.
More Information From the IRS Web Site
