Hello, and thank you for the forum.

Two years ago I was working as an independent contractor insurance agent.

The company that I was working for rented a residential house for an office.

After I was there part time for about a year, I approached the owner of the company to see if I could move into one of the rooms in the house and live there full time and work more hours. He had previously mentioned that someone else had done this for him in the past.

At the time, this arrangement seemed like a win-win for everyone; the residentially-zoned house had a full time resident, I was not paying rent any more, and I was also doing work at the office in the morning for which I was not paid cash for.

This arrangement lasted about a year. Eventually, I moved out of state and our professional association was dissolved. What I am now concerned about are as follows:

1. Was this arrangement a "barter" arrangement and do I need to file taxes for the room / use of the house as a residence? Keep in mind this was also my office.

2. If I do have to amend my tax returns and disclose any of this as income, do I need to have my former "employer" also agree that the income was paid or that a barter relationship existed? If he feels that I am wrong, can he challenge me in court?

I don't want to start trouble for anyone here, but I just want to know what my options are. I never realized this could possibly be construed as something I might have to pay tax on. Please help.

#1;Yes I guess so; as you said,”I was not paying rent any more, and I was also doing work at the office in the morning for which I was not paid cash for.”; The IRS wants to remind TPs that bartering transactions generally have associated tax reporting, accounting and recordkeeping responsibilities. The FMV of property or services received through barter is taxable income.As s self employer, a contractor, NOT an EE, as you can see, you need to file your return as long as the amount on line 29/ 31 is $400 or exceeds $400 on Sch C and also need to pay SECA taxes as long as the amount on line 2/ 3 on Sch SE is also $400 or exceeds $400; ALSO,
If you are filing as a sole proprietor, partner, S corp shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. however, You do not have to pay estimated tax for the current year if you had no tax liability for the prior year ; You were a U.S. citizen or resident for the whole year;Your prior tax year covered a 12 month period

#2;I guess you can do that UNLESS he understands the transaction; you can let him it is a barter transaction between you and him.

#3;Actually not in court but he may contact the IRS for more accurate info in detail/ for sure. Bartering income is considered taxable revenue by the IRS.Anyway he also needs to report his barter income that you didn’t receive from him as you said,” you was also doing work at the office in the morning for which you were not paid cash for.”So fair rental value of the room was equivalent to the cash he had to pay you if you had not used the room for rent free.The cash that he had to pay you is his barter income that he needs to report on his return as taxable income since he didn’t pay you.



#4;No trouble at all; you won't start trouble for anyone here;both of you need to pay tax on your taxable baretering income as mentioned previously.

Thank you for your detailed reply. I have a few points I want to offer as clarification. First, this company was never my landlord. I never paid rent to them. I moved into the office for free and chose to do any of the work I did there, including office work and/or yard work.

#1;the company doesn't have to be your landlord; it doesn't matter what relkationship you have or not.

#2; in return, the ER didin't pay you any money for compensation for your work;i mean you were also doing work at the office in the morning for which you were not paid cash for.It is still a bartering transaction. I guess you can contact a CPA/an IRS EA in your local area for more info in detail.

Interesting. I will be looking into it more. Question, from the IRS perspective, is it not possible to do work for free? I mean if I helped someone for free with a home project do I have to report that as bartering?

is it not possible to do work for free? I mean if I helped someone for free with a home project do I have to report... "==>>>>Then as long as the fmv of the work excedds $14K for 2013, it is a gift from IRS viewpoint, and yu need to file form 709 even if you do not need to pay gift tax on the fmv of your gift UNLESS the fmv of the gift ( I mean cumulative) exceeds $5.25 Million for 2013. in your situation, it is a bartering transaction as you do not pay rent to the owner of the office. SO UNLESS the fmv of your free work is more than $14K, then it is OK ; you do not need to file form 709 UNLESS you receive other benfits from your recipient,i.e., free rent , free taxable foods or etc