Click to See Complete Forum and Search --> : Question re. bartering services....
graphicsmama
10-16-2007, 09:50 PM
One of my clients wants a new brochure, but since we maxed out his budget on two previous projects, he's wanting me to trade services for it. So he came up with something that definitely spoke my language and now I'm wondering---how should I write this job up invoice-wise? I couldn't find anything in the GAG book and I'm wondering how I account for this at the end of the year....
TIA!
I wouldn't.
Under the table FTW!
Service for Service trade. No U.S. Currency is involved, therefore, it does not fall under Federal Tax Regulations. You don't need to claim it.
As always though, you should draw up a contract.
Never trust a Canadian - especially one that spells it wrong.
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 exchanged must be included in the income of both parties.
Income from bartering is taxable in the year in which you receive the goods or services. Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business. If you failed to report bartering income on returns you have already filed, you should correct this by filing an amended return, Form 1040X (PDF), for each year involved. For information on amended returns, refer to Topic 308.
A barter exchange 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 for additional information on this subject.
If you are in a business or trade, you may deduct any 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 (PDF), Proceeds from Broker and Barter Exchange Transactions. The Form 1099–B or other statement generally will show the value of any cash, property, services, credits, or scrip you received from the exchange during the year. The IRS will also receive the same information.
If you receive income from bartering, you may be required to make estimated tax payments. Refer to Topic 355 for additional information.
Additional examples of bartering, and information on how to report the income, are described in Publication 525, Taxable and Nontaxable Income.
Visit the IRS website for all applicable links
http://www.irs.gov/taxtopics/tc420.html
As I stated earlier "under the table FTW"
I was trying to avoid stating it in that fashion, MD. :D
budafist
10-16-2007, 10:54 PM
Are you planning to go:
1 brochure for 3 cows?
Or half a cow per hour of design?
I suggest you go for the per hour one since this guy has a tendancy to go over budget. Write a contract and make sure you give him a running update per proof on how many cows (hours) he is up to at each stage.
Are you going to ask for a few steaks for a deposit?
If you barter 3 cows for a brochure, then you only need one cow deposit.
Personally though, I think that's overpriced. I wouldn't pay more than a cow and 3 pigs.
budafist
10-16-2007, 11:09 PM
Mmm....roast pork....
http://www.caledoniacalling.com/uploaded_images/homer_drool-740916.gif
graphicsmama
10-17-2007, 01:23 PM
Thanks for the feedback....
I don't really need a cow for a depost because what is being bartered for I also get a contract for. So I'll have that up front. He just told me to write up the estimate however I want and I'm trying to figure that out....if I write it for what the barter is or if I write it for a dollar amount and take a route of exchanging checks instead....(that way I don't have to deal with it any differently than regular money...)
Thanks for the info MD, I'll have to read that more when I've got the rest of my coffee in me and am a little more awake. :)
Mmm....roast pork....
http://www.caledoniacalling.com/uploaded_images/homer_drool-740916.gif
Imma gonna have some for lunch. When I do my work in Chinatown, I always lunch at the Chinese BBQ next door. My favorites are the Roast Pork and BBQ Pork.
urstwile
10-17-2007, 04:11 PM
I work with a bartering agency here. In general, I estimate my time just like I would with any other job, and they add the cash value of my services, which I can then use as barter dollars for various services that they provide.
It's taxable, the form referred to in MD's post is the one I had to file last year when I filed my taxes.
frankster
10-17-2007, 04:23 PM
Cool Urst! So is it done purely on the bartering of hours, where every participant's hours are valued equally? I'm intrigued as to how that would work out.
urstwile
10-17-2007, 04:29 PM
Basically, they ask me to bid on projects and I estimate my time, just like I would on any cash based project.
If I work on the project, I bill them just like a regular non-barter client. They add the total of that into my barter account, which I can then use to "purchase" other services that they offer. At the end of the year, the amount of barter cash I've earned is filed on the 1099-B form and I pay taxes on that amount.
They have all kinds of services to offer for trade, show tickets, spa treatments, hotel stuff, timeshares, etc. I do pay a 12% broker fee when I barter for a service, but that's about it. A lot of these are services that I probably would never pay for with my real cash money, so it feels like I'm getting a deal, when, for example, I can get a hotel room for 12% of what it would cost me to pay cash. I know that's not really the case, but I consider it kind of like a luxury savings account.
graphicsmama
10-17-2007, 07:55 PM
Good info urst, thank you! I'll talk to them about this.
budafist
10-18-2007, 02:02 AM
Imma gonna have some for lunch. When I do my work in Chinatown, I always lunch at the Chinese BBQ next door. My favorites are the Roast Pork and BBQ Pork.
I think I prefer Roast Pork over BBQ Pork. More fat! and the crunchy bits are divine.
Now Roast Pork vs Roast Duck is more challenging question.
Roast Pork > Roast Duck, because it has less bones. :D I love duck, but damn it's hard to find meat on those scrawny things.
Now, a full course meal of Peking Duck, that's another story... *drool*
FYI, I'm currently snacking on 1 1/3 lbs of Roast Pork that I brought home with me. ;)
Red Kittie Kat
10-18-2007, 06:23 AM
man you are making me hungry ... I adore roast pork and roast duck .. I don't think I could choose ;)
budafist
10-18-2007, 06:55 AM
Mmmmm...Peking Duck with those thin pancake like things that you add with some sprint onion and cucumber and that divine sweet sauce stuff in your gob as fast as possible.
I have to say though, I have had Peking Duck in Beijing and I prefer New Zealand Peking Duck. Is that blasphamy?
hewligan
10-18-2007, 08:22 AM
Mmmmm...Peking Duck with those thin pancake like things that you add with some sprint onion and cucumber and that divine sweet sauce stuff in your gob as fast as possible.
I have to say though, I have had Peking Duck in Beijing and I prefer New Zealand Peking Duck. Is that blasphamy?
It probably just means you've been here a long time and your tastes are somewhat westernised. Either that or, there is the reality that Chinese food made in NZ is probably made with better quality ingredients...
and i'm a sucker for the bbq pork
budafist
10-18-2007, 09:15 AM
Well, I guess it is because in Beijing they prefer to taste the natural roast duck flavour. I found that it wasn't salty enough and verging on bland. In NZ they put quite a lot of salt in it for our Western tastes. I guess I'm not as yellow as we thought.
Drorain
10-18-2007, 01:30 PM
If they want to tax bartered services, then my donated services should be able to be written off. Until they rewrite the code I would give them a royal finger! ..|..
Of course all that is in the hypothetical…*cough*
Basically, they ask me to bid on projects and I estimate my time, just like I would on any cash based project.
If I work on the project, I bill them just like a regular non-barter client. They add the total of that into my barter account, which I can then use to "purchase" other services that they offer. At the end of the year, the amount of barter cash I've earned is filed on the 1099-B form and I pay taxes on that amount.
They have all kinds of services to offer for trade, show tickets, spa treatments, hotel stuff, timeshares, etc. I do pay a 12% broker fee when I barter for a service, but that's about it. A lot of these are services that I probably would never pay for with my real cash money, so it feels like I'm getting a deal, when, for example, I can get a hotel room for 12% of what it would cost me to pay cash. I know that's not really the case, but I consider it kind of like a luxury savings account.
That sounds like a pretty sweet barter system Urst. I guess the key is to have a very diverse group of participants. The only time I was ever involved with one of these things was through a print shop I worked at and while every one of the other participants wanted design and printing there were very few services we wanted or needed so we ended up way on the plus side with credits and never really were able to cash them in.
urstwile
10-21-2007, 10:04 PM
Well, yeah, Kool, that's the danger of this kind of thing, because it's possible to rack up a lot of credit that you don't cash in on, so you really have to evaluate the list of services carefully, make sure that they're things you'd actually want to go for, and then take it from there.
Otherwise, it works pretty well, and they're affiliated with a large barter network, so they can often get non-local services by going with one of the other groups in their network.