Barter Exchanges

A barter exchange is any person or organization with members or clients that contract with each other (or with the barter exchange) to jointly trade or barter property or services. The term does not include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis.

The Internet has provided a medium for new growth in the bartering exchange industry. This growth prompts the following reminder: Barter exchanges are required to file form 1099-B for all transactions unless certain exceptions are met.

Under the exceptions, barter exchanges are not required to file form 1099-B for:
Exchanges through a barter exchange having fewer than 100 transactions during the year.

Exempt foreign persons as defined in Regulations section 1.6045-1(g)(1)(i).
Exchanges involving property or services with a fair market value of less than $1.00.
For corporate members or clients, transactions may be combined and reported in aggregate.
Forms 1099-B are due by March 1, 2004 (March 31, 2004, if filing electronically).

Failure to file can result in significant penalties (Internal Code Section 6721). The penalty is based on when you file correct information return. The penalty is:

$15 per information return if you correctly file within 30 days of the due date (March 1, 2003), maximum penalty $75,000 per filing period.
$30 per information return if you correctly file after 30 days after the due date but by August 1; maximum penalty $150,000 per filing period.
$50 per information return if you file after August 1 or you do not file required information returns; maximum penalty $250,000 per filing period. A barter exchange is any person or organization with members or clients that contract with each other (or with the barter exchange) to jointly trade or barter property or services. The term does not include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis.

The Internet has provided a medium for new growth in the bartering exchange industry. This growth prompts the following reminder: Barter exchanges are required to file form 1099-B for all transactions unless certain exceptions are met.

Under the exceptions, barter exchanges are not required to file form 1099-B for:
Exchanges through a barter exchange having fewer than 100 transactions during the year.

Exempt foreign persons as defined in Regulations section 1.6045-1(g)(1)(i).
Exchanges involving property or services with a fair market value of less than $1.00.
For corporate members or clients, transactions may be combined and reported in aggregate.
Forms 1099-B are due by March 1, 2004 (March 31, 2004, if filing electronically).

Failure to file can result in significant penalties (Internal Code Section 6721). The penalty is based on when you file correct information return. The penalty is:

$15 per information return if you correctly file within 30 days of the due date (March 1, 2003), maximum penalty $75,000 per filing period.
$30 per information return if you correctly file after 30 days after the due date but by August 1; maximum penalty $150,000 per filing period.
$50 per information return if you file after August 1 or you do not file required information returns; maximum penalty $250,000 per filing period.