If you barter or trade in the course of your business there are some things you should know.

  • Barter and trade income are the same as any other income.  For tax reporting you must report the fair market value of the products and services you received; you also may be able to deduct the costs related to any items you gave up in the course of the trade.
  • If you are part of a barter exchange, an organized marketplace where members barter products or services, the exchange is required to issue Form 1099-B annually.  The exchange issues these forms to its members and files a copy with the IRS.
  • Barter income is generally taxable in the year it occurs but consult your tax professional because the rules may vary based on the type of bartering that takes place.

Don’t let this discourage you!  Once set up in software such as QuickBooks this process is easy to track and maintain and doesn’t require much extra effort for bookkeeping purposes.  Take the time on the front end so you don’t end up with open balances in Accounts Receivable and Accounts Payable that can be difficult to clear.  As a QuickBooks Certified ProAdvisor, I can help you with this process.  Our tax experts at JMF can assist you with any tax consequences of barter or trade transactions.