Turns out that bartering, the most ancient form of commerce, is
also the newest thing, thanks to the bad economy.
Turns out that bartering, the most ancient form of commerce, is also the newest thing, thanks to the bad economy.
Nationally, Craigslist’s bartering postings were up almost 100 percent between January 2008 and January 2009, while U-Exchange.com, a Web site connecting people who want to barter, logged nearly 1.1 million page views between mid-January and mid-February, according to U-Exchange co-founder John C. Moore. During the same period last year, the total was 362,000.
“That’s up 173 percent. When it really hit was January, after Christmas,” Moore said. “All of a sudden, you’ve gotta pay those bills. People didn’t have to do it when things were going good.”
Many folks don’t realize that when tax time rolls around, however, federal law requires them to report trades as income. Bartering is an exchange of property or services, according to Internal Revenue Service regulations, and the rules apply, whether it’s a face-to-face transaction or between barter -club members, Helge said.
“This even applies to farmers who trade their produce for another farmer’s produce,” said Terri Helge, a Texas Wesleyan University law professor and former accounting firm tax manager. “There is no threshold for a minimum amount.
“If you barter services for services or services for property, you’re supposed to report it,” Helge said. “It still surprises people, but it’s well established.”
Parties to a trade must report the fair-market value of what they receive, and the value will be accepted unless “the value can be shown to be otherwise,” according to www.irs.gov.
“What you base it on is the fair-market value of what you receive,” Helge said. “If we didn’t have this rule, think about how easy it would be: Every Wall Street executive would just be paid in stock . . . we’ll give you food. We’ll give you use of a limousine.”
This came as a shock to one local contractor who casually acknowledged bartering work for tax advice. When he told his CPA he’d been talking to a reporter about their service-for-service barter, the accountant hit the ceiling.
“I barter every year for my taxes,” said the contractor, who asked to remain anonymous for fear of attracting an income tax audit. “It’s like the Amish. It’s just a handshake.”
He and the accountant barter their services with one another. But the contractor has also installed a water heater for an artist in return for a portrait of a deer.
He also swapped work for a Web page.
David Stell, an Oklahoma City IRS spokesman, said there’s no way to calculate how much bartering goes unreported or the tax dollars that go uncollected as a result.
But he noted that agents routinely ask taxpayers whether they’ve participated in bartering transactions when they’re audited.
Moore questions the tax rationale. For example, what if you sold a bicycle you’d bought with after-tax dollars for cash?
“I don’t understand that,” Moore said. “You wouldn’t be taxed for selling that in a newspaper.”
But he’s more concerned with his own business, which is free to traders and is advertiser-supported. A flood of visitors to his site after a mention on “The Today Show” nearly crashed his server. The week following that national exposure was “over the top,” said a weary Moore, who’d been up since 2 a.m.
“We don’t see it letting up any time soon.”
