How to Report Barter Income on a IRS Tax Return

Bartering involves an exchange of goods or services between individuals that doesn't use money. It is a great way for businesses and individuals to market themselves to new clients and increase their revenues. Bartering income is considered taxable revenue by the IRS. Follow these steps to learn how to report your bartering income on your tax return.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Bartering records
• IRS Form 1040, Schedule C
• IRS Form 1099-B

1. Gather all of your bartering records and organize them according to commercial and non-commercial transactions. A non-commercial, casual exchange of similar services is usually not taxable unless you received income from the transaction. Reporting bartering income is mostly applicable to commercial transactions.

2. Obtain an IRS Form 1040 Schedule C--Profit or Loss from Business. You can obtain all IRS forms online, with a computer software tax program or as a hard copy via government offices like libraries or post offices or an accountant's office. Fill out the form completely, making sure to note your income, expenses and costs of good sold including inventory amounts.

3. Fill out a Form 1099-B--Proceeds from Broker and Barter Exchange Transactions if you used a broker or barter exchange. Fill it out completely, making sure to note your account number, how many shares were exchanged, classes of stock exchanged and profit or loss from transactions.

Tips & Warnings

• Keep all your records in a safe, fire-proof place. In case of an audit, you'll need your records.
• If you do not report your bartering income, you can amend your tax return by filing Form 1040X.
• If you engaged in bartering that also resulted in you receiving income, you might have to make estimated tax payments. Refer to Publication 525--Taxable and Nontaxable Income for clarification (see Resources list for link).
• The IRS office is available for help at [phone] from Monday through Friday, 8:30 a.m. to 4:30 p.m. EST.
• When in doubt, report it. Better to be honest than have the IRS after you with an audit.

Who Can Help:

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Resources

• IRS bartering info
• IRS taxable and nontaxable income list
• IRS Form 1099-B
• IRS Form 1040 Schedule C