| Champagne life on a beer budget?
Try bartering |
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Services that aren't typically bought and sold might
be harder to price, and in those cases, discuss with potential bartering
partners what each of you believe the services to be worth. Sometimes
a potential bartering partner might place a higher value on your
service than you do. On the flip side, someone might not be willing
to give you what you think is a fair deal. As with any financial
negotiation, leave some wiggle room, but don't accept a deal that
you're not comfortable with.
To find people to barter with, you can use a Web site
as Sandor did, search the Yellow Pages or you can merely start mentioning
to people that you know that you would like to barter your service.
"We usually say what we want in conversation," Gay says.
"Someone may say, 'I would love to have salsa lessons.' Or,
'You're a singer? I've always wanted to take voice lessons.'"
When someone expresses a desire for something you can offer, start
thinking about what you might be able to get from that person in
return.
Tax ramifications
While bartering allows you to receive goods and services without
spending money, it's still recognized by Uncle Sam as taxable income.
"The value of any bartered service is supposed
to be included in a person's or entity's gross income, and it would
be measured on the value of those services," says Joel Pascaner,
chairman of the tax section of the Georgia Society of CPAs.
In other words, if you received 12 dance lessons that
would have cost approximately $50 per lesson, or $600, then that's
$600 worth of income that you need to claim on your tax return.
Likewise, the person you bartered with should claim the fair market
value of the service you provided, as well. The year that you receive
the service is the year for which you should report the income.
If you're a small business owner and you barter certain
professional services, the same rules apply in terms of reporting
the income. However, you can also deduct costs that you incur when
doing the work.
The fact that the Internal Revenue Service considers
bartering a serious transaction underscores the importance for both
parties to take the agreement seriously. You might want to spell
out the terms of the bartering agreement in a written contract so
both parties are aware of the expectations of the other. Another
way to avoid problems down the road is to spell out all of the details,
including a date by which the service should be completed. That
way, should the agreement not be honored, you have the same legal
protections as someone who paid cash for a professional service
that was not rendered.
As long as both parties agree on the value of the
services and honor the agreement, bartering can be fulfilling to
everyone involved.
"Treating the relationship as you would any serious
financial relationship is important," says Gay. "And you
can actually broaden your network that way, too."
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