Bartering Income

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 received in exchange for goods or services you provide must be included in income in the year received.

Generally, you report this income on Form 1040 (Schedule C), Profit or Loss from Business. If you failed to report this income, correct your return by filing a Form 1040X. Refer to Tax Topic 308 for Amended Return information.

A barter exchange or barter club 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.

The Internet has provided a medium for new growth in the bartering exchange industry. This growth prompts the following reminder: Barter exchanges are required to file Form 1099-B for all transactions unless certain exceptions are met. Refer to Barter Exchanges in Publication 525, Taxable and Nontaxable Income, and the instructions for Form 1099-B for additional information on this subject. Persons who do not contract a barter exchange but who trade services do not file Form 1099-B. However, they may be required to file Form 1099-MISC. If you are in a business or trade, you may be able to deduct certain costs you incurred to perform the work that was bartered. If you exchanged property or services through a barter exchange, you should receive a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. The IRS also will receive the same information.

Please refer to our Bartering page for more information on bartering income and bartering exchanges.

If you receive income from bartering, you may be required to make estimated tax payments. Refer to Publication 525, Taxable and Nontaxable Income, for additional information.