TTP Accounting Barter Services

Maybe we should Barter

Barter is simply an exchange of goods and services, it’s important to know this exchange is a taxable transactions and should be included in your income and expenses, because although no money is exchanged a monetary value is still created and delivered.

Barter product and services should be included in income in the year completed, barter income can affect your total income tax liability, self-employment taxexcise taxes, state taxes, and employment taxes. You will give and receive a form 1099B for tax purposes.

They easiest way to handle your barter transactions is to treat it as you would any other business activity. Keep good records, work with reputable people and businesses, use a barter exchange to help coordinate the values and consult a tax professional if you have questions.

So you must keep a record of your barter transactions, including any expenses you have related to these transactions and the income you have from these transactions.

For example, an auto repair business may barter with a radio station that barters with a printer that barters with a delivery service.

There are a few exemptions from the requirement that bartered transactions be reported, by the IRS. Reporting is not necessary for barter transactions:

  • Under 100 transactions per year
  • Under $1 in value
  • With certain “exempt foreign persons.”

In addition, the IRS exempts transactions “involving corporate members or clients of barter exchange [which] may be reported on an aggregate basis.”

Just as income is a taxable transaction so are the expenses. The expenses incurred from your bartering may be deducted as legitimate business expenses.

For example, if you barter consulting services, and you must travel to meet the client, your business travel expense for this transaction is probably deductible. Or, if you paid to register on a barter exchange, the registration may be a business expense. These deductible expenses can reduce your income from the barter transaction.

So, in conclusion, barter transactions, both income and expenses, are considered in the same way as other income and expenses for your business in terms of their affect on your tax liabilities and the amount and types of taxes you must pay.

Best Wishes,

LaQuitta xoxo

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