What is “Bartering
Income”?
http://www.irs.gov/taxtopics/tc420.html
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 exchanged must be included in the income of both
parties.
Income from bartering is taxable in the year in which you
receive the goods or services. Generally, you report this income on Schedule C,
Profit or Loss from Business Form 1040. If you failed to report
bartering income on returns you have already filed, you should correct this by
filing an amended return, Form
1040X (PDF)(PDF), for each year involved. For information on amended
returns, refer to Topic
308.
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.
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 deduct any 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) (PDF), Proceeds from Broker and Barter Exchange
Transactions, or a similar statement, by
If you receive income
from bartering, you may be required to make estimated tax payments. Refer to Topic 355 for additional
information.
Additional examples of
bartering, and information on how to report the income, are described in Publication 525(PDF),
Taxable and Nontaxable Income.