In recent weeks we’ve ween a whole bunch of major news affiliates covering barter related stories, but until today none of the major newspapers has covered barter. Magazines, yes, newspapers no.
This article covers a specific case, a woman who trades weekends in her house for construction work. It also mentions and briefly explains barter exchanges and the tax implications of bartering.
Camille Tominaro’s vacation home near Hunter Mountain in New York could use some new floors and a good paint job, but she doesn’t have the money to hire a professional to do the work.
So, to get the job done, she is using another form of currency: her house. In exchange for getting the home improvements done, Ms. Tominaro is offering painters and carpenters a free stay in the vacation home.
Cash-strapped consumers are increasingly bartering to get needed products and services. If you’re considering bartering, here are a few things you should know:
Web sites that allow people to post ads for barters, such as Craigslist.org and U-Exchange.com, can help you track down someone who provides a service or product that you want and needs what you have. You can place an ad detailing what you’re looking for and what you have to offer in return. You also can respond to an ad you think would be a good fit.
But be careful about who you trade with, and do the same vetting you would do if you were paying cash. Visit the business, check with the local Better Business Bureau and ask for references. It also helps to stay local.
Ms. Tominaro advertised her bartering proposals on Craigslist. Recently, a carpenter she found on the site helped deliver some wood she purchased and will lay her floors down within the next few weeks. In return, he will vacation in the Hunter Mountain house with his family in the winter for a weekend.
Another option is joining a barter trade exchange. The exchange allows members to earn “trade dollars” by performing a service for other members, and then use those dollars for a service or product for themselves.
Some exchanges charge annual membership fees; others charge based on the cash value of each transaction. They also send users monthly statements and record all transactions in the annual 1099-B tax forms.
Whether you’re doing a direct trade of products or trading services through a barter exchange, the Internal Revenue Service requires that you treat barter income — what you receive on your end of the transaction — as any business activity, so you must report it on your tax return.
You may be subject to income tax, self-employment tax or excise tax depending on the form of bartering and the size of the transaction. Keep records of each transaction and use the 1099-B form to report the activity on your tax return.
For more information, search “barter” at www.irs.gov, or contact a tax professional.
Write to Jonnelle Marte at firstname.lastname@example.org