There are instances where a client cannot pay their bill. When this happens, some business owners will look to the goods or services provided by the client in her business, to see if a trade can be made to satisfy the debt. While most business owners would rather be paid for services rendered, a new copy machine, air conditioner or janitorial services are better than a past due account. However, what many taxpayers forget is that the value for the services exchanged is treated just like a cash payment, for income tax purposes. Consider a scenario where an attorney provides services to a client who owns a luggage store; the amount billed for legal services is $5,000. If the client offers $5,000 in luggage instead, then both the attorney and the luggage store owner must reflect $5,000 in income in the transaction. This is true whenever bartered services are made between businesses (except corporations) of $600 per more, per year. The payments are reported on Form 1099-MISC. For more information, view the IRS’ Bartering Tax Center
In accordance with Circular 230 Disclosure
1 comment on “Bartering Goods And Services? You May Owe Tax!”
Betty,
Would this also be the case for sites that offer points? Then you can exchange the points for favors on a site?
Kat Jennings
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