Bartering: You Scratch My Back, I’ll Report It on My Taxes

If you are a professional or business owner, you have probably bartered with someone this year. Is that barter taxable? Suppose you are a consultant, and your neighbor is an accountant. She agrees to prepare your tax return, and you agree to give her recommendations on her marketing strategy. Even if no money changes hands, you still need to report this exchange on your tax return. The amount you need to report is the fair market value of the services you received.

Usually, the fair market value of services you have received in a barter like this is the amount the other person would ordinarily charge. You can also agree to the value of the services in advance. In some situations, the tax rules on bartering are more complex. For example, barter clubs are required to withhold tax on any credit units you receive when they are credited to you. You should also keep in mind that, if the barter was part of a trade or business, you may be able to deduct costs you incurred to perform the bartering.

© 2013 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

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