Back to Bartering?

The news ran a quick segment yesterday about how Babysitting Co-Ops are springing up all over the place; the idea being that you log time watching other folks’ kids in exchange for them watching yours.

So, we’ve gone from a system of bartering where you had to find someone that possessed what you wanted and was also interested in what you had, to a symbolic representation of value (fancy description for money), to a tax system that’s so oppressive that folks’ are now reverting back to the inefficient, unreliable system of bartering as it’s less painful than having to deal with the government.

By the way, the IRS expects you to pay income tax on the fair market value of whatever it is that you bartered but neither the news article nor the Babysitting Co-Op web sites I visited make any mention of this.

http://www.irs.gov/businesses/small/article/0,,id=117613,00.html

Thoughts?

To some, having to spend the day in the company of a bunch of other people's kids is a plus. To others, it's a negative. So you could call it an FMV of $0 on average

RX Reven' wrote: By the way, the IRS expects you to pay income tax on the fair market value of whatever it is that you bartered but neither the news article nor the Babysitting Co-Op web sites I visited make any mention of this. http://www.irs.gov/businesses/small/article/0,,id=117613,00.html Thoughts?

That makes no sense what so ever. Do you have to report the fair market value of the letuce you buy at the grocery store as income? No, you don't, becuase it is not. Bartering is a transaction, not income. A good or service is exchanged for a good or service of equal perceived value. There is no income to tax.

Yeah, beware of bartering clubs or associations. A nationwide one just moved into this area and had a "free memberships," etc. advertised on the radio. This one had monitary units recorded to your account. You could then spend the units at any other member's place. Put a roof on someone's house for $3K, buy a whole bunch of pizza. I have no problems with it, but the IRS has a history of finding these associations, auditing them and then going after the individual members for the taxes on what they bartered for. Having all the data in a nice database with records already monitized like that makes an IRS audit a snap. If it wasn't for that little thing, I would have joined and offered Doctorin' and Chiropractorin' for Pizza, but if I have to figure the taxes on my services and mail a check to Obama, I'll just blow it off. I don't need pizza that bad.

Dr. Hess wrote: Yeah, beware of bartering clubs or associations. A nationwide one just moved into this area and had a "free memberships," etc. advertised on the radio. This one had monitary units recorded to your account. You could then spend the units at any other member's place. Put a roof on someone's house for $3K, buy a whole bunch of pizza. I have no problems with it, but the IRS has a history of finding these associations, auditing them and then going after the individual members for the taxes on what they bartered for. Having all the data in a nice database with records already monitized like that makes an IRS audit a snap. If it wasn't for that little thing, I would have joined and offered Doctorin' and Chiropractorin' for Pizza, but if I have to figure the taxes on my services and mail a check to Obama, I'll just blow it off. I don't need pizza that bad.

Well, that isn't technically bartering then. It is a secondary monetary system and I don't see the point unless it is meant to be a tax dodge...

There was a company called "TradeBank" a decade ago that was a bartering company. The printing company I worked for traded a metric ton of printing to them in exchange for tons of "TradeBucks". He got a pair of jet skis, and two company employee vacations that way. Not sure of the tax implications though, but I'd say "handshake economics" would be the way to go. No paperwork would be the way to go, just a trade.

I've never stopped bartering. It's the way to go and as far as reporting it, get bent Obama. It ain't income so I ain't reporting it!
They screw us so hard at every turn we need to take advantage of anything we can.

i'm with DrBoost... I paid taxes on whatever it was when I bought it (if its product i'm bartering not services)

In reply to DrBoost:

Be certain to exert your state-issued right to vote next November. It's the grassroots way to make "change you can believe in" and it starts at the local and state levels.

Hi WilD,

If you get a chance, please take a look at the IRS link I provided in my original post as it clearly states bartering is subject to income tax…if the going rate for baby sitting is say $15 per hour and we each take turns watching each others kids for three hours, we’re both supposed to report $45 in income to the IRS.

Hi DrBoost,

I think your “get bent Obama” comment can be seen as an eloquent real world application of the “nature always finds a way” theory. How much tax can be charged is naturally limited by how inconvenient the alternatives are.

It doesn't seem entirely unreasonable in the context of how things are taxed. If instead of trading babysitting time with the other person you went to work and "traded" your time at work for money, then gave the money to the other person, that money would be taxed when you received it and when they received it (both as income tax).

If you went to work and your boss paid you in gold ingots (very small ones obviously) and you then gave those ingots to the babysitter as payment, neither of you should pay income tax?

aircooled wrote: It doesn't seem entirely unreasonable in the context of how things are taxed. If instead of trading babysitting time with the other person you went to work and "traded" your time at work for money, then gave the money to the other person, that money would be taxed when you received it and when they received it (both as income tax). If you went to work and your boss paid you in gold ingots (very small ones obviously) and you then gave those ingots to the babysitter as payment, neither of you should pay income tax?

To me the point is, if I trade an R/C car for an Ipod Touch (anyone interested??) why should I pay tax on that? If I mow my neighbors lawn and he shovels my driveway, why should I pay tax on that? It's NOT income! I received no money for my service. It's E35M3 stuff. Just like when you inherit money from a passed loved-one, then pay tax on it. Every penny of that money was taxed, and it's taxed again. That's called double-taxation and it's against the constitution. They have their hand in my freaking pocket at every turn and squander it.

DrBoost wrote: They have their hand in my freaking pocket at every turn and squander it.

Tax collector:

DrBoost wrote: To me the point is, if I trade an R/C car for an Ipod Touch (anyone interested??) why should I pay tax on that? If I mow my neighbors lawn and he shovels my driveway, why should I pay tax on that?....

Well, the iPod and the RC car both have monetary value, much as coins and paper dollars do. When you trade you cash for an iPod at a store, you pay taxes. Physical effort also (can) have monetary value.

Certainly it is silly to pay taxes in the above example (for practical reasons if nothing else), but such "stupid" laws have to be on the books otherwise someone will take advantage of the loop hole and start "bartering" for office buildings and such.

The unfortunate side effect of people being unable to resist from taking advantage of situations or to abuse the "system" is that stupid laws need to be created to cover all possible angles. Taxes do need to be paid, and stupid laws need to be made in order to get people to pay them, most people don't volunteer.

aircooled wrote: Well, the iPod and the RC car both have monetary value, much as coins and paper dollars do. When you trade you cash for an iPod at a store, you pay taxes. Physical effort also (can) have monetary value. Certainly it is silly to pay taxes in the above example (for practical reasons if nothing else), but such "stupid" laws have to be on the books otherwise someone will take advantage of the loop hole and start "bartering" for office buildings and such. The unfortunate side effect of people being unable to resist from taking advantage of situations or to abuse the "system" is that stupid laws need to be created to cover all possible angles. Taxes do need to be paid, and stupid laws need to be made in order to get people to pay them, most people don't volunteer.

Everything you noted is proof-positive that our superannuated tax system is the unintended consequence of legislated good intentions.

shoot here in NC they even expect me to pay taxes (sales) on stuff I buy in other states.... not just off the www where the company might not collect NC's sales tax but anything I buy out of state and their tax is lower than ours( and pay sales tax on), but they're not going to reimburse me it that state has a higher sales tax....

Aircooled is exactly right about people "Bartering" for office buildings and the like if there isn't something on the books to keep it in check. Laws like that aren't there to send granny to jail if she buys you a candy bar for mowing her lawn (If you think they are, the tinfoil hat might be a bit tight).

I like bartering, and if I'm looking for something I'll usually ask if they need any work done or are looking for any kinds of goods before we talk money. It just makes so much more sense to me. Please just don't tell uncle sam...

RX Reven' wrote: Hi WilD, If you get a chance, please take a look at the IRS link I provided in my original post as it clearly states bartering is subject to income tax…if the going rate for baby sitting is say $15 per hour and we each take turns watching each others kids for three hours, we’re both supposed to report $45 in income to the IRS.

Couldn't you also claim you spent $45 on childcare, which would then leave you at a net of $0?

aircooled wrote:

DrBoost wrote: To me the point is, if I trade an R/C car for an Ipod Touch (anyone interested??) why should I pay tax on that? If I mow my neighbors lawn and he shovels my driveway, why should I pay tax on that?....

Well, the iPod and the RC car both have monetary value, much as coins and paper dollars do. When you trade you cash for an iPod at a store, you pay taxes.

The difference is that the tax paid on an iPod at a store is sales tax, none of which goes to the IRS. Government, is government, I guess.

hash include std_disclaimer.h I ain't a tax attorney.

The Feds tax Profit (income) among other things, but for us in this discussion, Profit. If you trade an iPod for an RC car, there may or may not be a profit. You back out your expenses to see. The Feds consider our time (your's and mine) to be absolutely worthless. Thus anything that you get for your time, be it an iPod, gold, silver, paper money, electron bit money, is 100% profit and fully taxable as such. If you babysit for someone and they give you an iPod, that iPod is taxable. You need to figure the value of that used iPod, subtract your expenses and send Obama a check for his portion. That's the law referenced to above. Someone else babysits for you and you give them an RC car, they need to do the same.

Jamesc2123 wrote: Aircooled is exactly right about people "Bartering" for office buildings and the like if there isn't something on the books to keep it in check. Laws like that aren't there to send granny to jail if she buys you a candy bar for mowing her lawn (If you think they are, the tinfoil hat might be a bit tight).

Thank you! I'm SO berkeleying sick of the "THE SKY IS FALLING!" mentality. Those laws are in place to keep people from exploiting the system on a serious level, not to take your precious lawn mowing money. Oh no! My neighbor baked me cookies because I put an alternator on for her last week! The gubment is going to steal my cookies!

WilD wrote:

DrBoost wrote: They have their hand in my freaking pocket at every turn and squander it.

Tax collector:

more like:

and has anyone heard of swap tree? Is this a "bartering site" I should stay away from? I signed up, but have not participated, so perhaps I'll politely ask to be removed.

WilD wrote: Do you have to report the fair market value of the letuce you buy at the grocery store as income? No, you don't, becuase it is not. Bartering is a transaction, not income. A good or service is exchanged for a good or service of equal perceived value. There is no income to tax.

Buying lettuce at the grocery store is not bartering.

Bartering is specified by the IRS as taxable.

Dr. Hess wrote: ...The Feds tax Profit (income) among other things, but for us in this discussion, Profit. If you trade an iPod for an RC car, there may or may not be a profit. You back out your expenses to see. The Feds consider our time (your's and mine) to be absolutely worthless. Thus anything that you get for your time, be it an iPod, gold, silver, paper money, electron bit money, is 100% profit and fully taxable as such. If you babysit for someone and they give you an iPod, that iPod is taxable. You need to figure the value of that used iPod, subtract your expenses and send Obama a check for his portion. That's the law referenced to above. Someone else babysits for you and you give them an RC car, they need to do the same.

Hmm, interesting angle, looking at it from a small business perspective. I think this is actually the proper way to do it (IRS wise), but most people will not want to put the effort (paper work) into it. Also, I think you may only be able to do this if you itemize. Also, again, not a tax expert.

P.S. - In my previous examples I was using "tax" generically so I did not differentiate between income / sales / state / federal.

I never stopped bartering either... everything from looking after horses for a few days in exchange for having a room painted, to drawing portraits of cars as payment for tires or front end work. If the government wants to try and get their slimy fingers into private arrangements between free citizens, I say "bring it on" shiny happy people!

One thing that really cheeses me off if paying sales tax on private party sales of used cars. Our state collects tax on the same vehicle each time it's registered to a new owner. A car can theoretically generate more than it's original MSRP in state sales tax if it changes hands often enough.