Do you value your time? Many business owners are afraid to charge for their services or have no idea what to charge in order to cover the full cost of business. Some feel that only greedy people charge.
We expect to get paid when we work for someone else as an employee. But entrepreneurs think we are good people if we provide the services or products for free or at an extremely reduced price.
The employer could not meet payroll if they did not put a value on their services and products and charge their customers.
Click play below to watch “Do You Value Your Time? The IRS does.“
The IRS (Internal Revenue Service) assigns a value to your time, services, and products sold, according to market value. The term bartered services is listed in the IRS tax code as taxable income. Bartered Services is an exchange of services or products instead of money.
For example, I could barter with a virtual assistant or a website designer for accounting services. I may perform bookkeeping or handle their taxes calculations and filings for an exchange of other things that I need to be completed in my business. Bartering especially helps new business owners or those that have limited cash flow.
Not that you shall actually serve the lender but debt feels like lockdown. Extra cash has to go to debt, there is a potential of losing property and some people are unable to leave jobs because of the amount of debt they are connected to in their lives.
Bartering is another means of having access to services that our current financial positions otherwise would not allow. While bartering can be helpful, there are a couple of things to avoid when bartering.
3 Things to Consider When Bartering Services
The IRS considers bartered services as taxable income. The value of services exchanged should equal in order to offset taxable income from the exchange.
Avoid a deal for which one person feels the services are not equal. Perhaps this person believes their product or services are worth more than your services or products. A different value of services provide is a potential issue. A valuation must be determined to verify the services are equal.
Example: if I provide 4 hours of accounting services for $335.00 then the exchange of services should be equal to the $335.00 in services. If not, the difference is still taxable income to the other person and one person may be offended.
Thanks to the internet, Barter Exchanges have made more frequent appearances. This is an exchange for which business owners sign up to be connected to other business owners who pay a fee to participate in the exchange. The business owner can earn bartered bucks. These bucks are considered income and will be reported by the exchange.
How to track bartered services: Set up a “Bartered Services” Income Account and Expense Account to track the bartered services transactions. Technically, this is considered cash transactions and can be tracked under cash services as well. This is important as the IRS can go back for what is called “back pay” and charge you taxes on unreported bartered services including penalties and interest.
The IRS considers your time, services and products to have a value. What’s interesting is we do not value our own time, services, and products. Good people can charge fair prices, receive payment, and help their business as well as others. If the IRS says your time is valuable shouldn’t you?
Other Related Articles:
Y. Michelle Coard Blog: ” 4 Tips to Avoid the Cash Drain of Emotional Pricing“