Trading Services and the IRS

[MJ]

Someone mentioned trading services as means of producing income tax-free. I'm sure many people do that to some extent, but I'd suggest getting advise from a competent tax advisor. This is likely to be considered "barter" and is taxable. As was noted somewhere else, the IRS can track how you live, your spending habits etc to compare with your reported income. If you spent $150,000/yr with a reported income of $25,000 (before deductions), you would probably get a visit from your friendly IRS Auditor. I'm not meaning to be critical but I don't think I would have detailed how I beat the IRS on a public forum.

Mick

[thelawnguy]

MJ you worry too much.

An occasional bartering of services is not going to cause anyone a problem. If it becomes a major portion of your workload, then Id start to wonder about how to report it.

[awm]

Sounds like a way for small buisiness to
make it inspite of all the downers. TM

[MJ]

Yeah, I probably do worry too much. That's what my wife tells me, too. It's just that I spent sixteen years of paying the IRS for a similar situation. Original debt was established based on what the examiner "estimated" to be about $800. If I'd hired a lawyer to fight it, it would have cost more than that. So when I acquiesed (the IRS's term), then they added penalty and interest and more than doubled. Then I started making monthly payments. In the meantime, interest keeps acruing. Then the next year I find that not enough had been withheld even though I'd reported dependents correctly. I hadn't managed to pay off the first debt. More penalties and interest. And so it went, year after year for sixteen years. And I read the other day that the IRS is stepping up enforcement which had been lax for the past couple of years.

So I think I'd rather worry too much than too little. Remember, the IRS doesn't have to prove you did or didn't, they can use statistical analysis. You have to prove your side with documentation. (Unless the new, kinder, gentler IRS has changed).

Mick

[Fantasy Lawns]

I had used the term "non taxable" income which is truely incorrect as....your right... trade & barter are one in the same....I should have not used this method in the "timesaving thread" as it is more of a cash flow help...but trading can save money on services....keep your reciepts to show for any expenses incured in the job...don't show as much profit on that one job....and do report an "amount" of income ...... but if the method is used to "avoid" taxes that in not such a good idea....as the IRS Auditor may be having a bad day ....& then as you know ... it could get ugly

[Charles]

I try not to do anything that would redflag my tax return to the IRS. You can be too creative and thats one thing that gets the IRSes attention. And there is nothing I am more afraid of(well except Keith in a ryans bathroom lol) is the IRS