Friendship fee service and tax

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farronwolf said:
What do you do for a living? What country do you live in?

Are you in the manure business, or is it simply a by product or waste product from your business you need to dispose of.

The OP clearly stated she was in the training business and was giving training service.
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I tend to agree with Agnus-dei (although I’m a very long way from being a financial expert).

If I was a plumber and a friend needed a leaky tap fixed then I’d do it for nothing. The next time he was around my place for dinner and he brought an extra bottle of wine which…oops…he forgot to take home…then we’re all square.
 
Last fun example and I’ll let it go.
Lets suppose you have an Aunt that is a registered massage therapist. She gives you a neck/shoulder massage and charges nothing. Following the implied logic here means: You would be responsible to pay a tax to the “gub” based on the fee she would normally receive for that service that you did not pay for.
Similarly your friend would “owe” to the “gub” a tax based on your normal fee for that service that was not paid for. See where this falls flat? 😉
A person following the guidelines set out is not breaking or avoiding that law.
And your scenario is legit as well.
Dominus vobiscum
 
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You can agree with whomever you want. Your example does not meet the definition of barter.

I have friends who are electricians. Have they come over and helped me do electrical work , yes. Did I give them accounting services in return. Nope. Had we bartered for our services, ie traded accounting work for electrical work, taxable events would have been generated for both of us.

Have I helped them build stuff at their house when they needed help. Yep. I am not a contractor and was doing it as a friend.
 
Your example is a bad one, and you can think what you want.

I do free tax returns all the time. Did two today in fact. One for an elderly client who has been a customer for decades, but really doesn’t need to file but a part time job she worked at held out income tax. I was simply getting her taxes back for her. I chose not to charge her. Perfectly within my right. I expected nothing in return.

The other one was for a college student. I don’t charge school aged or college kids for doing their taxes. My choice, but expected nothing in return.

Those are not barters.

The OP said since she didn’t charge her normal fee schedule she shouldn’t claim the lesser amount as income. That isn’t a barter, that is discounting a service.

Would have to go back and look up who started asking about bartering, but please. If you don’t understand tax law, please don’t give advice.
 
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farronwolf said:
You can agree with whomever you want. Your example does not meet the definition of barter.

I have friends who are electricians. Have they come over and helped me do electrical work , yes. Did I give them accounting services in return. Nope. Had we bartered for our services, ie traded accounting work for electrical work, taxable events would have been generated for both of us.

Have I helped them build stuff at their house when they needed help. Yep. I am not a contractor and was doing it as a friend.
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Don’t call it barter then. Call it helping a friend. It’s no big deal.
 
ok guys, it is a lil messy here. I don’t understand much of what i am reading and decided to pay tax, as of now he is not able to provide me something i need.
 
lets say i was a full time banker and taught guitar lessons for $50 an hr as a hobby. Would it be a sin to not declare that as tax?
 
anon91549587 said:
lets say i was a full time banker and taught guitar lessons for $50 an hr as a hobby. Would it be a sin to not declare that as tax?
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I think you mean not declare that as income.

If you are charging $50 per hour or $10 per hour for lessons it is income.

By tax code, hobby income is to be reported, but the expenses may not be fully deductable. So sometimes hobbies can cost you more taxes if filed properly than treating it as an actual business and being able to deduct your expenses.

If there is a profit motive, and reasonable expectation that profits are attainable, it should be reported as a business, regardless of whether you have another main source of income.

I have an accounting business as my real job, but up until a while ago my wife and I also did handgun instruction. Handgun instruction income was certainly reported as income.
 
farronwolf said:
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anon91549587:
lets say i was a full time banker and taught guitar lessons for $50 an hr as a hobby. Would it be a sin to not declare that as tax?
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I think you mean not declare that as income.

If you are charging $50 per hour or $10 per hour for lessons it is income.

By tax code, hobby income is to be reported, but the expenses may not be fully deductable. So sometimes hobbies can cost you more taxes if filed properly than treating it as an actual business and being able to deduct your expenses.

If there is a profit motive, and reasonable expectation that profits are attainable, it should be reported as a business, regardless of whether you have another main source of income.

I have an accounting business as my real job, but up until a while ago my wife and I also did handgun instruction. Handgun instruction income was certainly reported as income.
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You should charge for your financial advice, farron.

 
It’s worth noting US citizens are expected to pay tax on all income. There may be some ways to claim expenses such as by becoming a business even just as a sole proprietor, or tracking expenses as a hobby (which as suggested above have limits, usually limited to your income, so a hobby you spent $1000 on but make $200 you can only claim $200 in expenses, a business claims the whole thing).

People have a lot of misconceptions especially that anything under $600 doesn’t need to be claimed, but it’s not true.
 
And don’t forget that the 200 of expenses for the hobby go into itemized deductions so if the taxpayer isn’t itemizing and they are simply taking the standard deduction, they get no benefit for the expense, but still have to claim the income of 200.

You are correct. Most folks think if they didn’t make enough from one person to meet the $600 threshold for generating a 1099, they simply can ignore the income. There is a $600 threshold but only for the one paying for the service etc. The recipient is supposed to claim all income.

For a series of years, 1099-misc rules were changed to read that if you paid an attorney any amount of money, even $1 from your business, you were supposed to generate a 1099 for them. Why, because lawyers had the worst compliance for reporting income. Think of how much work they do for individuals that don’t give them 1099’s and how much money they were avoiding taxation.

Gotta love it. Lawyers pretty much write the laws, but tend not to follow them very well themselves in certain instances.
 
Dan123 said:
It’s worth noting US citizens are expected to pay tax on all income. There may be some ways to claim expenses such as by becoming a business even just as a sole proprietor, or tracking expenses as a hobby (which as suggested above have limits, usually limited to your income, so a hobby you spent $1000 on but make $200 you can only claim $200 in expenses, a business claims the whole thing).

People have a lot of misconceptions especially that anything under $600 doesn’t need to be claimed, but it’s not true.
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Don’t Americans have to declare gambling winnings as well?
 
Yes although you can subtract your gambling losses if you itemize your taxes. That’s fairly common as a concept. Turn $100 into $1000 in the stock market? Pay taxes on the $900 you made. Just the “new” money.
 
Barter income is taxable. Barter income would here be defined as the fair-market value of the consideration received less cost basis for product/services rendered. Labor is deemed to have a cost basis of $0, but any material costs can be deducted.
 
Dan123 said:
Yes although you can subtract your gambling losses if you itemize your taxes. That’s fairly common as a concept. Turn $100 into $1000 in the stock market? Pay taxes on the $900 you made. Just the “new” money.
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Considering my luck at the last few poker games, I’m due a considerable tax rebate.
 
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