Work for trade agreements is an opportunity to exchange work for something of value to someone else. A yoga instructor exchanging yoga lessons for assistance at the front desk reception. Also known as bartering; exchanging service for another service or something of value to the individual.
The Work for Trade Agreements are potential solutions for small businesses and organizations that have limited budget. However, precautions should be considered prior to setting up any work for trade agreement.
Additional Considerations:
- Local, State and Federal Tax considerations. Is the exchange taxable? More than likely yes, but this should be reviewed as well.
- Work for Trade Contract. Do we have a written and enforceable contract?
- Local, State and Federal Laws. How will this impact the FLSA, DOL, OSHA, etc. at the federal level and is there an impact at the local or state level? It is worth reviewing to ensure the agreement does not violate any laws.
- Value on both sides. Are both parties agreeing the value of one in exchange for the value of another is fair?
Work for Trade will not work for every organization, these are just a few considerations, and all aspects should be reviewed prior to implementing a Work for Trade Agreement.
IRS Rules Bartering for Service:
Bartering is the exchange of goods or services. A barter exchange is an organization whose members contract with each other (or with the barter exchange) to exchange property or services. The term doesn’t include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis (for example, a babysitting cooperative run by neighborhood parents). Usually there’s no exchange of cash. An example of bartering is a plumber exchanging plumbing services for the dental services of a dentist.
Information Returns for Bartering Transactions:
The Internet has provided a medium for new growth in the bartering industry. This growth prompts the following reminder: Barter exchanges are required to file Form 1099-B, Proceeds From Broker and Barter Exchange Transactions for all transactions unless an exception applies. Refer to Bartering in Publication 525, Taxable and Nontaxable Income and the Instructions for Form 1099-B for additional information on this subject. Persons who don’t contract with a barter exchange or who don’t barter through a barter exchange but who trade services, aren’t required to file Form 1099-B. However, they may be required to file Form 1099-MISC, Miscellaneous Information. Refer to the General Instructions for Certain Information Returns PDF to determine if you have to file this form. If you exchange property or services through a barter exchange, you should receive a Form 1099-B. The IRS also will receive the same information.
Reporting Bartering Income:
You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). If you failed to report this income, correct your return by filing a Form 1040-X, Amended U.S. Individual Income Tax Return. Refer to Topic No. 308 and Should I File an Amended Return? for information on filing an amended return.
Estimated Tax Payments:
If you receive income from bartering, you may be required to make estimated tax payments. Refer to Topic No. 306 and Form 1040-ES, Estimated Tax for Individuals for more information.
Additional Information:
Refer to Publication 525, Taxable and Nontaxable Income and Publication 334, Tax Guide for Small Business for more information on bartering income and barter exchanges.
https://www.irs.gov/taxtopics/tc420
It is advised to seek legal and CPA/financial guidance to ensure everything is done legally. FLSA guidelines should be reviewed prior to making any decisions. This is business to business.
Below is a draft contract (not considered legal advice):
This agreement is hereby made and entered on this date, date, by and between:
Contractor Name, of Contractor Company, hereafter called Contractor,
and
Client Name, of Client Organization, hereafter called Client.
The said parties, for the considerations hereinafter mentioned, hereby agree to the following:
The Contractor agrees to provide labor required to perform the work as described:
Contractor Services Provided
in exchange for the following:
Client Offering
under the following conditions:
Conditions of exchange
Contractor agrees to keep records of hours worked and the records will be available for review by Client. Client agrees to reimburse Contractor for expenses agreed between the Client and Contractor, in order to complete necessary work as required.
The Contractor agrees to complete work at the best of their experience and skills and to consult with the Contractor regularly to complete work according to the following time frame conditions:
Agreement timeline
Contract to be on a month to month basis. Either party shall provide one week’s notice for termination or amendment of the agreement.
Signed:
__________________________
Client Name (Client)
Client Signed Date
__________________________
Contractor Name (Contractor)
Contractor Signed Date
BURR CONSULTING, LLC 