Bartering, Cookies and the IRS

[Akavit]

So the other day a neighbor requested that I make her some sewing templates.  It's not a service I offer but one of my machines (absurdly over-priced machine for a task like that) can do the job so I set it in motion and fulfilled the request.

Yesterday she brought a container of homemade chocolate chip and walnut cookies.

Considering that the IRS demands taxes on all bartered transactions how might an exchange like that work out?  Technically, the cookies have no commercial value as they were not produced in a commercial kitchen.  It is probably illegal to sell them.  On the other hand, homemade cookies are worth more than anything on the Nabisco lineup thus placing them squarely in the "priceless" realm.

Does the IRS deserve a few dollars extra on the tax line this year or should I offer them 33% of the cookies?

In a hard case like this, one might say ignorance is bliss.  Knowing too much about tax law may result in a loss of cookies to the IRS due to honest entry of baked goods on line 555.  Someone in the dark regarding tax law will innocently withhold all such information and keep the cookies.

All this leads to a stunning conclusion.   The wise sayings of the ancients contain great truth.

"Come to the dark side, we have cookies."

[MilesChristi]

Satírical. I assume. Under the table transactions, are just that. Like tipping, taxing it would be ridiculous. Next thing you know the hobos would have to give their 10% for panhandling.

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[The Curt Jester]

Satírical. I assume. Under the table transactions, are just that. Like tipping, taxing it would be ridiculous. Next thing you know the hobos would have to give their 10% for panhandling.

Unless said hobos have been labeled as charitable organizations (and can a single person be an organization?), it'd probably count as income if they make over $600 per year begging.

[GeorgeT]

Satírical. I assume. Under the table transactions, are just that. Like tipping, taxing it would be ridiculous. Next thing you know the hobos would have to give their 10% for panhandling.

Unless said hobos have been labeled as charitable organizations (and can a single person be an organization?), it'd probably count as income if they make over $600 per year begging.

They would have to ban together as an organization. They would have to decide on a name at an overpass committee meeting around the flaming garbage can. Wine and cheese will be served afterwards courtesy of md 20/20 and little caesars dumpster off of Broad street. Like all organizations, they will eventually become corrupt and fall in a blaze of scandals.

[angelcookie]

I waited tables in my late teens/early 20s and you report tips- there's a nice little screen that pops up to add the tip in when you close a bill out. The credit crd tips are already transferred in the data.

[Greg]

Render unto Caesar what Bourbons to Caesar.

[MilesChristi]

I guess there is the rub, to where must we follow the tax system. What exactly must be rendered to Caesar?

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[Akavit]

Yes, my opening post was a bit satirical though everything in it was mostly true.  That includes IRS tax laws regarding bartered transactions.  However a plate of cookies is too big a hassle to appraise and enter into the books and as mentioned, I don't even offer pattern printing services.  If it were a notable trade such as a set of cabinets in exchange for a new roof then it would definitely need to be recorded and taxes paid.  Normally I only accept checks to avoid accounting hassles.  It's easier to pay someone then have them pay back.

Angel is certainly right about the tips in the food service sector.  The IRS also assumes people working in certain industries make a certain amount of money in cash tips so if you don't report, I'm pretty sure they'll just apply a standard tax rate.

I did at one time consider (for a few hours) setting up a non-profit instead of a for-profit then paying myself a wage as a corporate officer but decided that was too shady though it may be legal.  I suspect it would be financially beneficial though.  According to others I've talked with, Bosch is a non-profit because they make more money that way.  Perhaps European tax law just works a lot differently.

[piabee]

Do you also add up ad pay the sales tax for your out-of-state purchases?

[Akavit]

Do you also add up ad pay the sales tax for your out-of-state purchases?

Illinois simplified that so you can either collect receipts and report them or pay the standard rate.  I pay standard rate because tracking out of state receipts then adding them up every year is an absurd amount of work.

That's personal anyway.  For business, most purchases are for items destined for use in products being resold or going to non-profits so I don't owe sales tax on the vast majority of purchases.  An accountant also does the heavy lifting there for me.  LLC partnership laws get complicated especially when depreciation is added to the mix.

[Daniel]

In all seriousness, did you have an agreement to make the templates in exchange for cookies, or were you just doing her a favor by making the templates and then she expressed her gratitude by giving you cookies?  If the latter, then that's not barter and not taxable.

[VeraeFidei]

I guess there is the rub, to where must we follow the tax system. What exactly must be rendered to Caesar?

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Not income tax, morally speaking - it is government theft and immoral. Which means I don't bother reporting what they would never find out about anyways. It is, however, prudent to pay income tax on your usual income because otherwise a visit from the IRS is likely, and undesirable.

[Akavit]

In all seriousness, did you have an agreement to make the templates in exchange for cookies, or were you just doing her a favor by making the templates and then she expressed her gratitude by giving you cookies?  If the latter, then that's not barter and not taxable.

There really wasn't an agreement.  She made the request, I fulfilled it then she asked what she owed me.  I waived fees and told her to just give me a few cookies the next time she had some available since I know they are good.  She's one of those people that will want to give something in return so simply declining payment would have resulted in her giving me money anyway.

[MilesChristi]

It was a gift.

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[Kaesekopf]

It was a gift.

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Also possibly taxable.

You don't actually own your money.  The gov't let's you keep some of it, some of the time.