Are you looking for a way to save money on the products and services your business needs? Do you like the idea of getting what you need without spending any money? It’s possible—if you use barter.
Bartering simply means trading products or services with another business. Bartering can be an ideal solution for any business on a budget, because it lets you conserve cash and not take on additional debt. You can barter for just about anything, from marketing assistance or website design to accounting services or hotel rooms. The key is finding someone else who has what you need and wants what you have.
You can set up a barter arrangement with another company on your own, or use a barter exchange. Barter exchanges act as intermediaries between companies or individuals that want to use barter. You can search for exchanges on the International Reciprocal Trade Association (IRTA) website, or ask business owners you know if they have an exchange they are happy with.
To choose the right exchange, look for one that has a lot of members providing what you need. Also be sure to check with the Better Business Bureau and do an Internet search to see if there are any complaints against the exchange you’re considering. Finally, find out about the fees for joining and decide if these costs are worth your while.
Before engaging in barter either through an exchange or individually, familiarize yourself with the tax laws relating to barter. The IRS requires you to report the fair market value of any products or services you receive via barter on your tax return for the year in which they are received. You may also have to pay income tax, excise tax or self-employment tax related to the barter, depending on what was bartered.
Barter exchanges track members’ barter activity, send them a 1099-B form that reports the year’s activity at year-end, and also reports that activity to the IRS. All of this can simplify the tax aspects of barter considerably. If you’re not using an exchange, be sure to document all of your barter activity in writing. For more information about barter’s effect on your business taxes, visit the IRS website and talk to your accountant to make sure you’re in compliance.
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