![](\"http:\/\/s3.amazonaws.com\/snd-store\/a\/37870451\/07_01_19_601398828_sbtb_560x292.jpg\")
<\/p>\n<\/p>\n
Small businesses may find it beneficial to barter for goods and services instead of paying cash for them. If your business engages in bartering, be aware that the fair market value of goods that you receive in bartering is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties.<\/p>\n
Income is also realized if services are exchanged for property. For example, if a construction firm does work for a retail business in exchange for unsold inventory, it will have income equal to the fair market value of the inventory.<\/p>\n
Barter clubs<\/strong><\/p>\n Many business owners join barter clubs that facilitate barter exchanges. In general, these clubs use a system of \u201ccredit units\u201d that are awarded to members who provide goods and services. The credits can be redeemed for goods and services from other members.<\/p>\n Bartering is generally taxable in the year it occurs. But if you participate in a barter club, you may be taxed on the value of credit units at the time they\u2019re added to your account, even if you don\u2019t redeem them for actual goods and services until a later year. For example, let\u2019s say that you earn 2,000 credit units one year, and that each unit is redeemable for $1 in goods and services. In that year, you\u2019ll have $2,000 of income. You won\u2019t pay additional tax if you redeem the units the next year, since you\u2019ve already been taxed once on that income.<\/p>\n If you join a barter club, you\u2019ll be asked to provide your Social Security number or employer identification number. You\u2019ll also be asked to certify that you aren\u2019t subject to backup withholding. Unless you make this certification, the club will withhold tax from your bartering income at a 24% rate.<\/p>\n Required forms<\/strong><\/p>\n By January 31 of each year, the barter club will send you a Form 1099-B, \u201cProceeds from Broker and Barter Exchange Transactions,\u201d which shows the value of cash, property, services, and credits that you received from exchanges during the previous year. This information will also be reported to the IRS.<\/p>\n If you don\u2019t contract with a barter exchange but you do trade services, you don\u2019t file Form 1099-B. But you may have to file a form 1099-MISC.<\/p>\n Many benefits<\/strong><\/p>\n By bartering, you can trade away excess inventory or provide services during slow times, all while hanging onto your cash. You may also find yourself bartering when a customer doesn\u2019t have the money on hand to complete a transaction. As long as you\u2019re aware of the federal and state tax consequences, these transactions can benefit all parties. Contact us for more information.<\/p>\n \u00a9 2019 <\/em><\/p>\n <\/body> Small businesses may find it beneficial to barter for goods and services instead of paying cash for them. If your business engages in bartering, be aware that the fair market value of goods that you receive in bartering is taxable income. And if you exchange services with another business, the transaction results in taxable income […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[],"class_list":["post-14006","post","type-post","status-publish","format-standard","hentry","category-small-business-tax"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/14006","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=14006"}],"version-history":[{"count":0,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/14006\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=14006"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=14006"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=14006"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n<\/html><\/p>\n","protected":false},"excerpt":{"rendered":"