Taxing Voluntary Trade. It's what the government does best.

Did you know that businesses and individuals that use bartering to acquire products and services are held to rules from the IRS? The simple act of mutual trade between people is subject to oversight and increased taxation by the Federal Extortion Agency. So what are the rules and what are the penalties for not complying? Is there a way around the hand of government?

Just another way for the Government to steal wealth.

The IRS lays out a few things businesses should know before they mutually trade with others.

Barter exchanges.  A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually. The exchange must give a copy of the form to its members and file a copy with the IRS.

Bartering income.  Barter and trade dollars are the same as real dollars for tax reporting purposes. If you barter, you must report on your tax return the fair market value of the products or services you received.

Tax implications.  Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.

Reporting rules.  How you report bartering varies depending on which form of bartering takes place. Generally, if you are in a trade or business you report bartering income on Form 1040, Schedule C, Profit or Loss from Business. You may be able to deduct certain costs you incurred to perform the bartering.

*According to the IRS website

All of this is a clear indication that the IRS thinks that whether currency is exchanged or not, the transfer of products and services is subject to taxation.

“In 1982, the IRS recognized barter as legal tender and barter exchanges as third-party record keepers, like accountants and banks. The exchanges must report barter income to the IRS on form 1099B”, says Karen E. Klein in a 2012 article for Bloomberg Businessweek.

Even though the government has taken this stance against voluntary exchange a free market system has come about. In an article posted to LewRockwell.com, writer Karen De Coster gives an explanation of a localized system of community barter. The Roanoke Valley Time Bank is a website devoted to help local individuals find help, services and other things on a system of barter and what the system calls “Time Dollars”. These dollars are obtained by helping or bartering some time, products or services to other members, time dollars can then be used on personal wants or needs, simply posting the job or product details of what is wanted and others barter their time dollars to help you. What a fantastic idea! What beautiful Anarchy this is!

 The mission statement for the Roanoke Valley time Bank is as follows:

“The mission of the Roanoke Valley TimeBank is to foster the well being of our community by providing a member-driven network of services that strengthens social bonds, encourages reciprocity, enhances our local economy, and builds on a  foundation of respect and equality.  Exchanges among members are recorded, honored, and rewarded through the use of "Time Dollars," a currency of equally valued services that empowers people to utilize their assets and enhance their lives, neighborhoods, and communities.”

Roanoke Valley Time Bank is part of a larger network of nationwide Time Banks.

This subject originally found its way into my brain via an article in a local newspaper by a tax preparer. He makes a point that though businesses and individuals are required to report these mutual trades very few actually do. I suppose others find this kind of theft undue and inhibitive to the creation of wealth or capital. In an age where one could seek out professional help through the internet on a voluntary basis, federal regulators try their hardest to punish cooperative help and to burden the individuals with compliance to unsavory rules and regulations.