I hear a lot about the bartering of services in the online space. You build a website for me and I do your bookkeeping for six months. No money exchanges hands so no taxable income or expenses. Wrong!
The IRS says the fair market value of goods or services received must be included in business income in the year received and this “income” is subject to self employment tax. You can deduct associated expenses against this barter income.
Barter income is also subject to 1099 filing requirements so if you gave bartered services then you must issue a 1099 to the recipient to secure your own fair market value deduction for the value given.
Please make sure you discuss bartered transactions with your tax preparer this year as the IRS is on the lookout for these under-reported transactions.
For more resources, go to www.wendybarlin.com