Some of you are nodding your head in agreement because you have been willing to help another solo entrepreneur by offering your skills, time or talents. We've all done this kind of 'horse trading' with no thought about any tax implications. Most of the time we are so focused on the million and one things we must do for our own business, we don't consider trading our services or products for something we need as a financial transaction.
Barter used to be a viable option for many small business owners who needed to have work done but were short of cash. Today, barter has fallen somewhat out of favor since the IRS got involved.
The official definition from the IRS related to bartering reads like this - A barter exchange 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
Now we come to the confusing part. What does 'similar services' mean? If Joe cleans the oil traps in your restaurant kitchen and you host his 25th wedding anniversary dinner - does that equal 'similar services'?. The answer may be on the site but I couldn't find it!
Then we come to the good part. When you read the 'exceptions' allowed for bartering, there is a line that states "Exchanges involving property or services with a fair market value of less than $1.00".
What this appears to mean is, the work Joe put into your restaurant for which he normally charges $300 will get you a 1099B at the end of the year. It gets better - You must send Joe a 1099B for his anniversary dinner! Sounds like B.S. to me
You can read the full information here: Barter Exchanges
To learn more about barter exchanges read Barter News
That's it for today and I'll leave you with this
"There is only one thing more painful than learning from experience, and that is not learning from experience" - Laurence J. Peter
