Personal Barter Agreement

"Handshake agreements" have often been replaced with written barter agreements.

A personal barter agreement sets down the terms of exchange between two individuals who will swap goods or services. It often includes the quantity of goods or number of hours of services and guarantees about quality of goods or services.

History

Barter as an informal way of trade has gone on for thousands of years, long before the use of money to pay for goods and services. Formal agreements specifying what will be swapped also have existed in various forms for hundreds of years.

Considerations

Many barter transactions happen informally between parties with no written agreement and can lead to misunderstandings about what is being traded.

Features

A written barter agreement clarifies exactly what is being traded, specifying amounts of goods, hours of service, method of exchange and in some cases, guarantees about quality and timeliness.

Function

Often the agreement will list penalties or contingency arrangements for a party that does not perform his part of the exchange.

Legal and Tax Requirements

Legal requirements differ from state to state but the Internal Revenue Service (IRS) considers barter as a form of taxable revenue and requires barter exchange companies conducting more than 100 transactions per year to get Social Security or employer identification numbers and to send barter participants an IRS Form 1099-B or Proceeds From Broker and Barter Exchange Transactions form each year to file with their tax returns.

References

• 5 Rules for Bartering Your Way to Business Growth, by Anne Ramstetter Wenzel (2008) EntrepreneurismBible.com
• Do You Barter? The IRS Wants Its Cut by Robert W. Wood (2009) Forbes.com