Barter and the IRS

Discussion in 'Homesteading Questions' started by BCR, Jan 22, 2005.

  1. BCR

    BCR Well-Known Member

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    This is for your information only-I am not a tax professional. I do realize there is an underground economy, I just want you all to play safe out there. In otherwords, think before you speak about private arrangements.

    Here you will find Tax Topic 420 that explains how to count your bartering arrangement as income: http://www.irs.gov/taxtopics/tc420.html

    Publication 525 also explains instances of bartering and how to pay taxes on it as income.

    An excerpt from the IRS website:

    "Bartering occurs when you exchange goods or services without exchanging money. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services. The fair market value of goods and services exchanged must be included in the income of both parties.

    Income from bartering is taxable in the year in which you receive the goods or services. Generally, you report this income on Schedule C, Profit or Loss from Business Form 1040. If you failed to report bartering income on returns you have already filed, you should correct this by filing an amended return, Form 1040X (PDF), for each year involved. For information on amended returns, refer to Topic 308."
     
  2. amelia

    amelia Well-Known Member

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    I'm no tax professional either, but it seems important to mention that the IRS also adheres consistently to the concept that "de minimis" transactions will not be subject to taxation. I was just reading one of the IRS publications in which it was stated that a Christmas bonus to an employee in the form of a turkey or a ham would be considered de minimis. I got a laugh out of that, because for a homesteader, that could be the basis of a pretty good swap! It may well be that many of the barter transactions on which homesteaders rely are of such insignificance to the IRS that they would not even be deemed taxable.
     

  3. amelia

    amelia Well-Known Member

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    Can you just see the IRS agents rolling in on ATVs with top-mounted headlights to confiscate a dozen duck eggs and a handmade doiley?
     
  4. Ozarks_1

    Ozarks_1 Well-Known Member

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    :haha:

    Unfortunately, they're much more likely to bring the loacl SWAT team. :eek:
     
  5. fordy

    fordy Well-Known Member

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    ..............Bartering is just another method that the IRS would justify to collect Taxes from it's Subjects :no: . Just keep in Mind that the Congress has codified a virtual litany of Legal Expense deductions that Corporations can Take that are Unavailable to the Average Citizen . So , A person would have to be a Fool to report ANY bartering activity and then pay both Income tax and Self employment Tax. Bartering is , BY definition , Earned Income and Therefore subject to Self Employment Tax ....I should qualify my statement here by adding that it is "Labor" , performed by Either or Both sides that is subject to SE tax . Trading personal items like cars or exchanging business assets that are subject to depreciation are subject to both being taxed on the Gain and recapture of Depreciation .... fordy.. :eek: :)
     
  6. edjewcollins

    edjewcollins Well-Known Member

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    Hahahhahhahahhahhahhah ROFLMA! Reporting barter to the IRS, stop, your killing me :haha: I think I need to go change my shorts! Reporting anything to the IRS is a hanging offense the way I was raised. :yeeha:

    Ed
     
  7. oz in SC

    oz in SC Well-Known Member

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    It is simply amazing to me that people STILL think the IRS and income tax a good idea.....

    Bartered goods are income...interesting since income was I thought CASH MONEY.

    Actually it is just sickening.
     
  8. Darren

    Darren Still an :censored:

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    For most folks, barter isn't going to be a huge source of "income." I'm not suggesting you don't play fair with the IRS but recognize the IRS isn't omnipotent. If you doubt that, consider why the IRS requires that you submit W-2s with your return when the W-2 states that the info is being supplied to the IRS. Why would they need TWO copies when they already have one with your SSN on it before you file????? If you've followed the stories about the IRS computers for the last decade, you'll know the answer.

    The IRS has no way of tracking every financial transaction going. They can't show up at every yard sale. Neither do they check every classified ad. They have to rely on folks to self report. From what I've read even eBay sales are only checked for high dollar sellers. If you're selling diamonds or something else that attracts attention, anyone that thinks the IRS won't notice, is going to get a surprise.

    Again, I'm not suggesting anyone not comply with the law. Just keep in mind the more info (forms you file) the greater the chance you might make a mistake and attract the attention of the IRS. The IRS isn't known for ignoring mistakes. If you make one maybe they'll want an audit. The Survivor winner who didn't report his winnings is a case study in stupidity and proof that paperwork (in that case a 1099) will catch up with you.

    Like BCR, I'm not a tax professional so take care.
     
  9. sisterpine

    sisterpine Goshen Farm Supporter

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    personally i never barter anything that amounts to the amount the irs would want to hear about (wink). and if i did i sure would follow the law and report it (wink) LOL
     
  10. apirlawz

    apirlawz playing in the dirt

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    My hubby is a tax accountant....we have a comfortable little "don't ask, don't tell" policy... at least I'm comfortable with it!! :D Of course, all of my bartering would probably fall into the "de minimis" catagory so far - oh well.

    We went 'round and 'round about this subject a while back. It usually entails him explaining IRS barter rules, followed by a lot of very colorful language from me. :no:

    On the flipside, it's really nice to be able to deduct all the farm/market garden start-up expenses from out joint return...when you actually do have to play by the rules, it's nice to have someone who knows all the tricks... ;)

    April
     
  11. bumpus

    bumpus Well-Known Member

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    .
    A barter exchange is any person or organization with members or clients that contract with each other (or with the barter exchange) to jointly trade or barter property or services. The term does not include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis.

    Homesteaders----Your small rinky dink trades do not count
    because they are on a noncommercial basis!
    .
     
  12. Cosmic

    Cosmic Well-Known Member

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    The IRS may be the least of the worries. Big and bumbling.

    The guys to watch out for are the locals and the State. Many have very aggressive programs for anything that smells like a business, money or something to put a fee or tax on. Plus zero deductions and in some cases will throw you in jail.

    Many places around me now require a permit for a yard sale, you offer anything to anybody in public better have a peddlers license. (Reason #49 to be leaving). MA Statie boys love to hang out in NH and bag a fellow for bringing goodies across the State line, what you got in the trunk there Boy!!! :no: They really hang around the NH liquor places or big ticket item stores. Would you believe the law requires you to report yourself, plus pay the tax avoided??? Plus a fine, fee and ticket and and and..... :D

    Any serious bartering, clubs or ongoing activity is sure to attract their attention. Mum and low key is the word. Once the locals get you, the IRS is sure to be informed. :rolleyes:

    Don't go advising anybody else how to avoid, taxes, fees and the such. That is a conspiracy. Read those IRS instructions, you must report anyone attempting or offering or asking how to structure a deal to avoid the rules, including yourself and everybody involved, even if the deal never takes place once the parties decide it may be illegal. i.e. Many small checks or payments to avoid reporting large transactions and so much more.
     
  13. BobBoyce

    BobBoyce Well-Known Member

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    The best way to deal with it...

    I see nothing, I hear nothing, I know nothing, and most important of all, I do nothing...

    Even if they think I did. :haha:

    Bob
     
  14. antiquestuff

    antiquestuff Well-Known Member

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    That ticks me off-does anyone know what the Constitutional right to remain SILENT means? "You must report..." is unconstitutional. Plain and simple. Whatever, some people justify this..........
     
  15. desdawg

    desdawg Well-Known Member

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    I just wrote a contract to sell a piece of real estate where I will have a large capital gain. :) I can actually create an exchange where a true swap doesn't exist. But it has to be a similar commodity, in my case real estate = more real estate, not stocks or bonds, etc. It's called a 1031 Tax Deferred Exchange. Essentially I have to escrow my proceeds and designate other real estate that I will purchase within a certain amount of time. I can continue doing this indefinitely until I finally take the cash out. The key word is deferred, not avoided. But paying taxes later is usually better.
    For small transactions and no paper trail I would live by Golden Rule #2. "I would rather beg for forgiveness than ask for permission."
     
  16. mikell

    mikell Well-Known Member

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    I read somewhere the IRS is going to outsorce it's tax collection to private companies. Imagine how ugly that's going to get the harrassment and threats and visits not to mention the legal cost.


    mikell
     
  17. Darren

    Darren Still an :censored:

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    "Imagine how ugly that's going to get the harrassment and threats and visits not to mention the legal cost."

    Mike, I think that's good news because the collection agencies are governed by federal regulations. They can't seize property like the IRS. Also it's an admission about how messed up the IRS is if they can't do their job. It's another reason to dump the tax code and move to something simpler.