Tax Responsibilities of Bartering Participants |
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| If you engage in barter transactions you may have tax responsibilities. You may be subject to liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.
Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter - barter for another’s products or services - you will have to report the fair market value of the products or services you received on your tax return.
Reporting Bartering Proceeds
If you barter your products or services through a barter exchange, you should receive a Form 1099-B, “Proceeds from Broker and Barter Exchange Transactions.” The amount shown in 1099-B Box 3 “Bartering” is your barter transactions proceeds and is generally reportable as income and must be included on your tax return. Barter exchanges have an annual obligation to report your bartering proceeds to the IRS.
Generally, you report this type of business income on Form 1040, Schedule C Profit or Loss from Business (PDF), or other business returns such as Form 1065 for Partnerships (PDF), Form 1120 for Corporations (PDF), or Form 1120-S for Small Business Corporations (PDF).
Staying in Compliance
Treat barter income as you would any other business activity. Keep good records, work with a reputable barter exchange and consult the IRS or a tax professional if you have questions.
If you have failed to report this income, correct your return by filing an amended return such as Form 1040X (PDF). Refer to Topic 308 for Amended Return information. If you receive income from bartering, you may be required to make estimated tax payments.
References/Related Topics
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Page Last Reviewed or Updated: December 16, 2009
