The IRS Releases Information on Bartering Income for Online and Home Based Businesses

Bartering Income

Bartering is the trading of one product or service for another. Usually there is no exchange of cash. It is the most ancient form of commerce. Any business owner or professional who has a product or service to offer can barter.

While our ancestors may have exchanged eggs for corn, today you can barter computer services for auto repair. Another example of a one-on-one, non-barter exchange transaction is a plumber doing repair work for a dentist in exchange for dental services. The fair market value of the goods and services exchanged must be reported as income by both parties.

Barter may take place on an informal one-on-one basis between individuals and businesses, or it can take place on a third party basis through a modern barter exchange company.
Tax Responsibilities

Income from bartering is taxable in the year it is performed. The rules for reporting barter transactions may vary depending on which form of bartering takes place. Refer to Tax Responsibilities of Bartering Participants for more information about reporting income and staying in compliance.

Home-Based Online Barter Business

If online bartering turns into a business, or you have recurring barter transactions and are purchasing items to barter with the intention of making a profit, you may have started a barter business.

If Your Bartering is a Trade or Business

If you are operating a viable bartering business, you may be entitled to deduct business expenses. Do you have an established business and are augmenting your sales with barter transactions? If so, include the sales from bartering in your business income.
Bartering Depreciated Business Assets

If you barter business assets or close your business you may have capital gains, ordinary gains and depreciation recapture to report. An example is the barter of an automobile used for business for a product or service.

Bartering Appreciated Assets

Examples of appreciated assets often include art, antiques and collectibles. If you have barter transactions of property where the fair market value is more than your cost or other basis, you usually will have a reportable gain. These gains may be business income or capital gains.

For more information on addational tax deductions for web site owners, visit: http://websitetaxwriteoffs.com/

Earned Income Credit Guideline for 2008 Tax Returns

Earned income credit. The maximum amount of income you can earn and still get the credit has increased. You may be able to take the credit if you earn less than:
$12,880 ($15,880 if married filing jointly), do not have a qualifying child, and are at least 25 years old and under 65,
$33,995 ($36,995 if married filing jointly), and have one qualifying child living with you, or
$38,646 ($41,646 if married filing jointly), and have more than one qualifying child living with you.

http://taxeswilltravel.com

The IRS Lost $11 to $13 Billion in False EITC Claims in 2007

IRS is taking a multi-prong approach to reduce the number of erroneous EITC claims. (Eearned Income Claims) The agency estimates that 23 to 28 percent of EITC claims filed for tax year 2007 were erroneous and resulted in overpayments of $11 billion to $13 billion.

IRS adopted the EITC Paid Preparer Compliance Program because paid preparers:


*Prepare approximately 70 percent of the returns filed with EITC claims
*Can play a role in helping the IRS reduce EITC errors

IRS developed a tiered EITC Paid Preparer Compliance Program with a range of activities designed to influence behavior and reduce error. Consequences of non-compliance are based on whether the error is determined to be unintentional due to misapplication or misunderstanding of the tax law or an intentional disregard of the tax law. IRS also has a compliance program addressing erroneous EITC claims on taxpayer prepared returns.

For 2009, IRS will:
Implement a first time paid preparer program. This educational and outreach program is directed to preparers identified as “new” to EITC return preparation. IRS will send these preparers letters outlining their due diligence responsibilities and listing common errors. The agency will closely monitor initial returns signed by these preparers for errors and make follow-up contacts, by mail or phone, if the agency identifies a high error rate.

Make face-to-face visits to return preparers who file highly questionable EITC returns. An IRS criminal investigator and revenue agent will visit selected return preparers to discuss the identified errors, remedies, preparer responsibilities and possible civil and criminal penalties that could result as a consequence of filing inaccurate EITC returns.

Continue the due diligence audit program where agents review paid preparers’ due diligence records onsite. These visits can result in penalties assessed against the preparer if they cannot substantiate due diligence, including the knowledge factor and recordkeeping requirements, was exercised on each EITC return. The visits could result in penalties against the employing tax preparation firm if IRS agents determine the business did not provide its employees with sufficient training and guidance to avoid erroneous claims. The selection criteria for these visits are similar to those used to identify returns for examination.

Beginning on Jan. 1, 2009, the standard mileage rates for the use of a auto used for business is:

55 cents per mile for business miles driven
24 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations

Note: If a taxpayer drives to his/her place of employment - this is NOT tax deductible, however, if the taxpayer drives "from" his/her place of employment to a second job, these miles are tax deductible.

For more information on tax deductions for small business owners, visit: http://websitetaxwriteoffs.com/

For legal clarification, visit irs.gov