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:

  1. Local, State and Federal Tax considerations.  Is the exchange taxable?  More than likely yes, but this should be reviewed as well.
  2. Work for Trade Contract.  Do we have a written and enforceable contract?
  3. 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.
  4. 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-BPDF 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

Original Post Date: April 2024

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Published by Mathew W. Burr, MJ-LEL, MBA, MHRIR, GPHR, SHRM-SCP, SPHR, CPHR-INT, Chartered CIPD

Mathew W. Burr, MJ-LEL, MBA, MHRIR, GPHR, SHRM-SCP, SPHR, CPHR-INT, Chartered MCIPD Lean Six Sigma Black Belt ABOUT: Matthew Burr has over 18-years of experience working in the human resources field, starting his career as an Industrial Relations Intern at Kennedy Valve Manufacturing to most recently founding and managing a human resource consulting company; Burr Consulting, LLC, Talentscape, LLC and Co-Owner of Labor Love, a Labor, and Employment Law poster printing company. Prior to founding the consulting firm, the majority of his career was heavy industry manufacturing and healthcare. He specializes in compliance auditing, training labor and employment law, conflict resolution, performance management, labor, and employment relations. Matthew has a generalist background in HR and operations, while providing strategic HR and operational solutions to his clients, focusing on small and medium sized organizations. He works as an Adjunct at Alfred State University, Tompkins Cortland Community College, and Montgomery Community College. He successfully designed an HR Concentration in the business management major that aligned with both SHRM and HRCI certifications, providing opportunities for students to sit for both the SHRM-CP and aPHR certifications upon completion of the degree, concentration, and internship hours as an Assistant Professor of Management at Elmira College (Retired January 2022). Matthew is also the SHRM Certification Exam Instructor, with a current pass rate of 92% on the SHRM-SCP and 83% pass rate on the SHRM-CP and a combined 88% on both exams over a 7-year period of instructing the course (Elmira College, Collin College & The College of St. Rose). Matthew works as a trainer at Tompkins Cortland Community College, Corning Community College, Broome Community College, and HR Instructor for Certification Preparation for the Human Resource Certification Institute (HRCI). He also acts as an On-Call Mediator and Factfinder through the Public Employment Relations Board in New York State, working with public sector employers and labor unions. PUBLICATIONS: Matthew has over 70+ publications including, American Bar Association (ABA) Experience Magazine, Cornell HR Review, Business Insider, New York State Bar Association (NYSBA), PayScale, Society of Human Resource Management (SHRM), and Expert 360 (in Australia). In early 2017, he published his first book, “$74,000 in 24 Months: How I killed my student loans (and you can too!),” proceeded by his second book, which was published in January 2021, “Slay the Student Loan Dragon: Tips and Tricks on How to Conquer the Student Loan Game” and his most recent book, “Unbox Your HR Career” in July 2023. VOLUNTEER WORK: Matthew is currently the New York State Society of Human Resource Management (NYSSHRM) District-Director. EDUCATION & TRAINING: Additional Training & Development:  SHRM Workplace Coaching and Mentoring Recertification Program, 2020  SHRM Foundation Employing Abilities @Work Certificate, 2020  SHRM Foundation Veterans at Work Certificate Program, 2018  Delta County Chamber of Commerce: Delta Force Leadership Program, 2013 FEATURED IN & ON: Matthew was featured on CNN Money, Fast Company, Fits Small Business, Fox News, Magnify Money, Monster.com, My Twin Tiers, Namely, Student Loan Hero, Smart Sheet and CEO Blog Nation, Human Resource Certification Institute (HRCI), Society of Human Resource Management (SHRM). Burr Consulting, LLC Capabilities Statement General Information: Burr Consulting, LLC Owner: Matthew W. 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