Greece, despite another bailout from Eurozone lenders, is still struggling to get its economy together. Now it faces another internal threat: bartering.
The New York Times reports that as the Mediterranean country "grapples with a continued downturn, bartering is gaining traction at the margins of the economy" because money is just not readily available. Liz Alderman writes:
"Graphic artists are exchanging designs for olive oil. Accountants swap advice for office supplies. In the agricultural heartland and on the Greek islands, informal bartering, which has historically helped communities survive, has intensified as more people exchange fruits, vegetables, other crops, equipment, clothing and services."
The process is being aided by Tradenow, an online bartering system that now has more than 30,000 registered members.
"Upload what you have," urges Tradenow above rotating images of items that can bartered. Further down on the Tradenow home page, users are reminded, "Not Everything! Just what you don't need and it's a shame to waste. Don't Forget! You can also offer your personal work or art as well."
Points for products: Tradenow provides tradepoints — one point equals one euro — that participants can use to barter directly. Or, if they prefer, they can save the digital currency to exchange for more costly goods and services.
This helps buyers and sellers get around bartering's practical problems, such as the physical exchange of bulky goods and working out exchanges where products or services are of vastly different values.
It's also a good, immediate alternative to keep commerce going as Greece works through its liquidity issue.
There are, however, some worries.
Drawbacks of bartering: Some Greeks, according to the NY Times article, see a barter system as a replacement currency that could make leaving the European Union easier.
There also is concern that Tradenow and similar barter servicers, as well as the informal exchanges that have been going on for, well, centuries, will become a full-fledged black-market economy that skirts taxes and regulations.
Ah, yes, taxes.
Greece's inability to effective collect taxes was a big contributor to its latest fiscal mess. If bartering citizens cut out the country's tax collector, it will lead to more fiscal uncertainty, and likely another crisis.
Tradenow acknowledges that taxes are a consideration, but it has nothing on its website, at least not on the English version. It directs users to ask for specifics via email.
I shot off a note to the company, but have not received any word yet. I'm not surprised, what with the global time difference. I'll let you know when I do hear back.
Bartering is taxable: Here in the United States, barter transactions are treated as if cold cash exchanged hands. And that means taxes are due.
If, for example, a plumber fixed his dentist's clogged kitchen sink in exchange for a filling, the dentist must count the fair market value of the repair as taxable income paid for the tooth patch. The same is true for the plumber when he tallies his earnings.
In this case, if the plumber and the dentist agreed before any work was done by either on the value of their services, the Internal Revenue Service will accept that amount as fair market value, unless the value can be shown to be otherwise.
Basically, the IRS wants you to be honest in these transactions. Everyone, including tax examiners, know what dentists and plumbers charge, so don't try to low-ball the charges to reduce your taxable income.
As with cash payments, income from bartering is taxable in the year it is performed.
Bartered earnings also are subject to, depending your tax situation, to self-employment tax, employment tax, or excise tax. And barter activities also could result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.
Essentially, barter transaction values are treated as cash at tax time.
In most cases, barter income is reported on Schedule C or Schedule C-EZ. However, when barter involves an exchange of something other than services, say rental space in exchange for the tenant's artwork, you may have to file another form or schedule.
The IRS has more bartering details in IRS Publication 525, which also has several more examples of various types of barter payments.
You also can check out the IRS' Bartering Tax Center, as well as the special page on the tax implications of barter exchanges. If you barter your products or services through a barter exchange, you should receive a Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, to help you meet your filing obligations.
And if you live in a state that collects income taxes, those tax collectors will want their share of your barter earnings, too.
Have you ever bartered? Was arriving at the appropriate taxable value easy or difficult? Most importantly, did you report the transaction on your taxes?
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