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Bringing Barter Back

By on June 15, 2015
Bringing Barter Back

Bartering is an ancient practice that’s enjoying a renaissance in today’s uncertain economy. Frugal folks know that your time, your skills and your knowledge are valuable. If you have something to offer someone else — a skill, a talent, a service, an object — you can seek out like-minded individuals and offer a trade for something you need or want. Finding people to barter with can be tricky, but like many other things, the Internet makes it more accessible and easier than ever.

Why Barter?

Bartering allows you to save money for things you really need — like paying the electric bill or rent — and still get what you want or need by offering to trade something you already have. If you’re a small business owner who chooses to barter, you’re also generating word-of-mouth advertising for your business and good customer relations with potential clients. Even if you don’t work for yourself full time, you’ll still earn a reputation for your skills when you barter, potentially bringing in a new income stream or source of other people with different, but useful skills or items worth bartering for.

How Do I Get Started?

Bartering is all about staying local. You can find people willing to barter via your newspaper’s classified ads or via classified ad websites such as Craigslist.com. If you’re wary of meeting total strangers through impersonal classified ads, you can also open an account on a bartering website. Websites like TradeAway.com and Swap.com allow you to enroll and start trading directly with other members.

Some websites operate on a different premise, allowing you to trade your skills, time or items for “credits” to apply toward things you need. For example, on TimeBanks.org, if you mow John’s lawn, you could earn one credit for each hour you worked. If you need someone to watch your child for an hour, you could find someone offering that service and use one of the credits you earned to pay for it. While this type of bartering isn’t bartering in the strictest form, it does work as a type of “surrogate” currency. The premise is the same.

Setting the Ground Rules

At first, a lot of people tend to wonder if bartering is a scam. On the contrary, it’s a valid method of exchange. However, if you aren’t savvy, you can find yourself stuck with a less than optimal deal. You should know the fair market value of what you’re offering and the value of what you want.

You wouldn’t trade a moldy old shoe for a pair of brand new roller blades and you wouldn’t expect someone else to, either. Set down the rules and terms of your barter with your trading partner and spell everything out clearly. If the exchange involves providing services over a long period, lay out the rules and conditions. If you need extra security, get the contract signed and notarized (most banks will do this free for their customers).

According to the IRS, Barter Income is Income

Everything’s got a price and the IRS is acutely aware of this. That’s another reason why it’s important to know the value of what you’re trading and the value of what you’re getting. Even if you’re bartering, you still have to pay taxes on all earned income. So if you cooked someone dinner in exchange for a couple of chickens, you’d owe the IRS taxes on the value of those chickens. Your barter partner would have to report the fair market value of that catered dinner.

Barter exchanges — like the websites mentioned above — are required to send you a 1099B form for income from broker and barter exchange transactions. If you don’t go through an exchange group but arrange a barter on your own, you’ll probably end up filing a 1040 Schedule C Profit or Loss from Business form. Keeping detailed records of your bartering will help your accountant come tax season (possibly the same accountant you’re trading auto repair skills with).

The Worst They Can Say Is No

The opportunities for bartering aren’t limited to traditional groups, classified ads or barter websites. Sometimes you can find opportunities to barter in unexpected places. Usually you’ll have the best luck with small local businesses. While it’s highly unlikely that a big box store will accept a papier-mâché sculpture of a cat as payment for a bulk pack of toilet paper, your local dentist may need art for his office and decide that your sculptures are worth part or all of your bill with him. It never hurts to ask if you can barter services and goods with someone. After all, the worst they can do is say no, right?

When we recognize each other’s assets, we develop creative ways to make our life better through barter. Moreover, when we start sharing these assets to get what we want, the pleasant side effects of bartering might help us realize that while the best things in life might not be free, sometimes they feel that way.

Frugal Village

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