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Do you understand the tax rules of bartering?

CPA rules 101: Your individual income tax return can include more than just monetary transactions…such as bartering.

Bartering is the act of trading goods or services for other goods or services, usually without using cash. You can barter on an individual or business level, or through a barter exchange company.

Bartering stands as a solid alternative to seeking a loan or searching for money to pay for an item or service. Even better? No interest is accruing as you repay your loan principal.

But don’t think if no cash changes hands, you don’t need to report the exchange on your tax return—Uncle Sam still wants his!

If you use an organized bartering exchange network, expect a Form 1099B each year, showing your proceeds from your transactions. The company also must file a copy of Form 1099B with the IRS.

If you earn barter or trade dollars, these count as U.S. currency in the eyes of the IRS and must be reported on your tax return.

Even those individuals operating on a private level—independent of any organization—must report the fair market value of the product or service they receive as income on their tax returns.

The good news: businesses can likely use an offsetting expense against this income. But business owners may also be subject to self-employment, employment, or excise taxes—just as if they used regular currency.

If all this sounds complicated and you need the assistance of a qualified CPA and tax accounting team to prepare your taxes, the experienced Patrick & Robinson CPAs staff can help.

Please contact us at Office@CPAsite.com or (904) 396-5400.

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