Feb. 04, 2004
Bartering In Today’s Economy
Most people think that in current times in the United States
bartering is not a common act. When the idea of bartering comes to mind
most people think of chickens being traded for pigs or goats for a bundle
of rice. Well, the fact is that bartering is still very prevalent among
small businesses and self employed persons in the construction and repair
fields. Also, the internet has played a major role and provided new growth
in the barter exchange industry. We will look at what a barter transaction
is, when it is taxable, exemptions from having to file barters and fines
incurred if bartering is not reported, and lastly how it relates to
Bartering occurs when you exchange goods or services without
exchanging money. An example of this would be a carpenter doing repair work
for a doctor in exchange for medical services or a dentist doing dental
work on a pool boy in exchange for free pool cleanings. A barter exchange
is any person or organization with members or clients that contract with
each other to jointly trade or barter property or services. This does not
include informal change on a non commercial basis.
Income from a bartering is taxable in the year in which you receive
the goods or services. The exemptions are the following:
1) Exchanges through a barter exchange having fewer than one
hundred transactions during the year.
2) Exempt foreign persons.
3) Exchanges involving property or services with a fair market
value of less than one dollar.
The penalties for not filing barter transactions can be steep if
not taken care of properly. If you file correctly within thirty days
of the due date of March 1st, the fine is fifteen dollars per return
with a maximum fine of 75,000 dollars. If the returns are filed within
thirty days after the due date the fine is increased to thirty dollars
per return with a maximum fine of 150,000 dollars. And if your returns
are filed after August 1st or you do not file the returns then the
fine is fifty dollars per information return and the maximum fine can
be as high as 250,000 dollars.
The proper form to file with is form 1099b. This form comes with
three copies, one for the IRS, one for the recipient and one for the
payer. These forms must be filled out for each individual transaction
but can be consolidated as long as the parties stay the same. Since
most transactions will not have an exact value estimation of the fair
market value is required in most cases.
This relates to Macroeconomics in the public or government
sector. Bartering is mainly in small businesses and self employed
contractors. The taxes are filed through the IRS. Helps with our
national deficit, national defense, and other government provided
Multiple Choice Questions
1) List one reason why a barter would not have to be reported?
A. The chickens used were sick and old.
B. It was between two contractors who were brothers.
C. The transaction was high in value but only done on a daily
D. There were less than one hundred transactions done throughout
2) What is the form used to file proceeds from barter transactions?
B. x-300 barter form.
D. tax requisition statement.
3) What industry has provided new growth for bartering?
A. Media industry.
B. Internet industry.
C. Small business.
D. Unemployed single soccer moms that collect welfare.