Ask the VR Photography Experts
Q: Is it OK to trade services for perks or other value from clients, instead of charging them real money? Isnt a barter or trade a good way to save on taxes, particularly if what the client is trading is something I need anyway?
A: This would probably be in direct violation of IRS regulations in the US. Merchandise or services that are exchanged in barter and trade are fully taxable, just as cash or other payments are. The value of a computer or camera that a client gives you in full or partial payment for services you render needs to be declared as income. It is income and counts toward any profit that you have to pay taxes on. It is a violation of federal law to conceal or to not report such transactions, and there are both financial and criminal penalties that can result.
Furthermore, many barter agreements can wind up becoming financial traps to those involved. Most business people need real money to pay their bills. Its highly unlikely that barters or trades will put food on your table or pay your power, phone, insurance or monthly mortgage/rent bills. Barter/trades can be beneficial at times, but its easy to fall into financial difficulty if you do them too often. The important thing to remember in any agreement, whether for cash or barter, is to trade real value for real value. For example, it doesnt make much sense to trade $10,000 of your services for a rapidly depreciating $10,000 wide format printer, which you have little need for and little likelihood of being able to sell. Furthermore, if the media and inks wind up costing you another $1,000 a month in order to use it, youve just added a significant overhead cost to your business because of the trade, instead of being able to pay your bills with income.
Always consult your personal financial expert(s) and lawyer(s) before making such decisions.
- Scott Highton