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Rev. date: 11/30/2016

Bartering Income

Tax Topic 420
Bartering is the exchange of goods or services. A barter exchange is an organization whose members contract with each other (or with the barter exchange) to exchange property or services. The term doesn't include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis. Usually there's no exchange of cash. An example of bartering is a plumber exchanging plumbing services for the dental services of a dentist.
The Internet has provided a medium for new growth in the bartering industry. This growth prompts the following reminder: Barter exchanges are required to file Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, for all transactions unless an exception applies. Refer to Bartering in Publication 525, Taxable and Nontaxable Income, and the Instructions 1099-B, for additional information on this subject. Persons who don't contract with a barter exchange or who don't barter through a barter exchange but who trade services, aren't required to file Form 1099-B. However, they may be required to file Form 1099-MISC, Miscellaneous Income. Refer to the Instructions 1099-MISC to determine if you have to file this form. If you exchange property or services through a barter exchange, you should receive a Form 1099-B. The IRS also will receive the same information. If you receive income from bartering, you may be required to make estimated tax payments. Refer to Tax Topic 306 and Form 1040-ES, Estimated Tax for Individuals, for more information.
You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Form 1040 (Schedule C), Profit or Loss from Business (Sole Proprietorship), or Form 1040 (Schedule C-EZ), Net Profit from Business (Sole Proprietorship). If you failed to report this income, correct your return by filing a Form 1040-X, Amended U.S. Individual Income Tax Return. Refer to Tax Topic 308 and Amended Returns for information on filing an amended return.
If you're in a trade or business, you may be able to deduct certain costs you incur to perform services that you barter.
Refer to Publication 525, Taxable and Nontaxable Income, and our Bartering Tax Center page for more information on bartering income and barter exchanges.