Bartering is as good as cash

Bartering is awesome means for businesses and nonprofits to access good and services without expending cash that may need to be devoted to the most critical aspects of the operation. Bartering has been around for thousands of years and is still used today.

However, a common overlooked, misunderstood and (in many instances) disregarded concept is the recognition of income for bartering transactions on accounting books and tax returns. The general assumption is bartering does not create an income recordable and taxable event. However, FASB and the IRS and related guidance are clear that it does because it is viewed as an economic event that directly affects the generation of revenue and profit for the business.

While all bartering transactions do not require informational filings (e.g. 1099B), parties to the transaction are required to record and report the bartered product or service received as income. The good thing is the bartered good or service given can be taken as a business expense.

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Render to Caesar what is Caesar’s

You may have heard this saying before, but it is a principle that often goes ignored by some in the faith community. We work with a number of churches and clergy around tax and accounting issues. Some things we have learned over the years are that to due to ignorance, or a blatant and knowing disregard of the tax regulations, churches and clergy do not follow the rules regarding reporting income for clergy in their various roles and functions.

We could list several biblical/religious reasons why this is a problem which those of the faith know all too well. However, we will stick to the secular factors that could put the minister and church in jeopardy.

U.S. tax regulations are very clear that income received by a duly commissioned, ordained or sanctions clergy person must be reported and applicable taxes paid. We have found over the years that some clergy and their churches or ministries have found rationalizations for not following the law and tax regulation. The penalties can be stiff including large penalties, assets forfeiture, and even the possibility of jail time for the right offenses.

The good news is clergy do not have to pay taxes of their is cause based upon religious beliefs. However, in order to avoid tax filing and reporting requirements, clergy must opt out based upon their descent of paying taxes for religious reasons by filing paperwork spelled out by the federal tax code.

The bottom line here is, churches and clergy should ensure that they are in compliance with the certain secular laws as they do the work of God. Rationalizations to do otherwise may not only contradict the principles of scripture of respective faith communities, but could also put someone in financial or criminal jeopardy if uncovered by the IRS or other tax agency.

Here is some IRS guidance for further consideration:

www.irs.gov/taxtopics/tc417

www.irs.gov/publications/p517

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