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Entering A Job Payment As Store Credit In QB...??

 
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Old 01-14-2015, 11:38 PM   #21
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Re: Entering A Job Payment As Store Credit In QB...??


wow-lots of info.

could we treat those materials in this manner...
I have a job where I buy (or issued a 'credit') $5000 worth of materials for the job but even though I only use $3000 worth of material, the rest is stored in my shop where I will use those materials when and where I see fit. The job was still billed $5000 in materials, EVEN if I took a hit on the job (on paper) and lost money. In reality, we recoup it in the future by already having the materials on hand with a significant discount vs retail cost.

valid argument? not valid argument?
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Old 01-15-2015, 01:02 AM   #22
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Re: Entering A Job Payment As Store Credit In QB...??


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I don't think you're right on this one PC.

I see why it would seem that way but, to the IRS, it doesn't matter weather you receive $10k in currency or $10k worth of gold, silver, lumber or jellybeans. It's $10k in agreed value.

Your point about using the materials on another job doesn't hold water because it isn't really any different than if you were paid $10k in currency and then spent that $10k on materials for the next job. It's the same thing.

He won't have to pay taxes specifically on the value of that material because it's only the net profit of the business that is really at issue. Your point that it will all wash out appears to be correct but, if it's all the same, then it should be properly recorded for his records and there for the IRS so they don't start wondering where the money for those materials invoices came from.

I wouldn't hide it because it will make it look like he was using cash from undisclosed income to pay for the materials.

Nobody is hiding money. It is all about how you want to do the paperwork as long as you report and pay the taxes you owe. Tax agencies do not have a standard system that you have to use in-house. They only have standard forms you have to file your taxes on.In my previous post, I said if you want to make sure that you are being transparent for your CPA, or IRS then I would attach a note with my records just in case someone asks, but to try to create a separate account or system would be a total waste of time since there is no direct capital gains from the materials.

If you trade a job for a water heater and sell the water heater on another job the only thing the IRS cares about is what you profited from the two jobs and they don't care how you do your in-house book keeping.

When trading work for a water heater and then selling the water heater on another job you can lump the two jobs together and come up with a profit of $900, or you can break each job separately and the profit will still be $900. It doesn't matter how you break the jobs down as long as all the tax agencies get their money.

People are misinterpreting the meaning of bartering.

Bartering and the IRS rules have nothing to do with this subject because the sole intention of bartering is to trade goods or services, bypass using money and in some cases to earn a profit and avoid paying taxes. That is not the case here.

The following is not a case where bartering is involved and the contractor is trading work for materials and the subject in this thread is no different. At the end of this example we will trade materials for labor and use the materials on two different jobs.

Suppose, your are installing a room addition for $50,000. Your material cost is $25,000. Your customer tells you that his uncle had $5,000 worth of lumber laying around his house. Your customer puts the lumber on the ground and he puts a window on the ground. Your customer tells you that you can have the lumber for free to use on his job if you will install the window for free at his uncle's house.

According to everyone on this forum this is bartering. It is not!.The only thing that is going to happen is your material cost will be lower and you will earn more profit. At no time will you be obligated to report the materials you got for free.

This job has now become two separate jobs and doing the book keeping is not a problem. Just as the previous examples on other posts you only need to do your normal book keeping and you do not have to tell the IRS that someone gave you a window and lumber. The only thing the IRS cares about is the bottom line and your taxable income.

Your book keeping will be as follows:

Total Contract amount $50,000
Minus materials you paid cash for
Minus other expenses
= Total Profit

The free lumber and window never has to be reported to the IRS because you never paid for those materials and you did not make a profit directly from the free items you received. You now have a higher profit that was earned from your labor because you got the materials for free and it is only the profit that is important. The IRS does not need to be told that your profit is higher because your customer kicked in some free materials. If you think so, then that would be like saying if the customer hands you a new faucet and asks you to install it for free then you would be obligated to put that faucet on your books. You can't.

I am so positive that I am not even going to talk to my CPA about this.

Last edited by pcplumber; 01-15-2015 at 01:07 AM.
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Old 01-15-2015, 01:26 AM   #23
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Re: Entering A Job Payment As Store Credit In QB...??


I'm not arguing that it doesn't change his profit for the year. The bartering that people have referred to is when someone offers business services and receives non-business tangibles(for want of a better description) for personal use or sale. This is not that.

The only thing that I am saying is that it should be properly RECORDED which is what the OP was asking in the first place. This is a business transaction and it should be recorded both because it has an impact on the financials he uses to calculate annual sales, profit, job costs, etc. and because it's one of those things that can cause a lot of headaches during an tax audit. Actually entering it in QB is very simple so I can't think of a good reason not to do it.

My example of taking $10k in currency profit from a job and applying it towards a material purchase for another job holds up, IMO. In the end, they will affect his year end numbers the same way and I assume that we would all enter $10k in currency.
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Old 01-15-2015, 01:53 AM   #24
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Re: Entering A Job Payment As Store Credit In QB...??


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Originally Posted by pcplumber View Post
Nobody is hiding money. It is all about how you want to do the paperwork as long as you report and pay the taxes you owe. Tax agencies do not have a standard system that you have to use in-house. They only have standard forms you have to file your taxes on.In my previous post, I said if you want to make sure that you are being transparent for your CPA, or IRS then I would attach a note with my records just in case someone asks, but to try to create a separate account or system would be a total waste of time since there is no direct capital gains from the materials.

If you trade a job for a water heater and sell the water heater on another job the only thing the IRS cares about is what you profited from the two jobs and they don't care how you do your in-house book keeping.

Not true at all. You are required to report GROSS INCOME. That's the only way they can check your numbers. You have to prove what you owe.

When trading work for a water heater and then selling the water heater on another job you can lump the two jobs together and come up with a profit of $900, or you can break each job separately and the profit will still be $900. It doesn't matter how you break the jobs down as long as all the tax agencies get their money.

People are misinterpreting the meaning of bartering.

Bartering and the IRS rules have nothing to do with this subject because the sole intention of bartering is to trade goods or services, bypass using money and in some cases to earn a profit and avoid paying taxes. That is not the case here.

What are you talking about? Batering has everything to do with the IRS, it's income. The sole intention is trading something you have for a service you need. Sometimes people don't have the money. Sometimes I might have something that is not worth as much to me as it is to you. It's not to earn a profit and avoid paying taxes.

The following is not a case where bartering is involved and the contractor is trading work for materials and the subject in this thread is no different. At the end of this example we will trade materials for labor and use the materials on two different jobs.

Suppose, your are installing a room addition for $50,000. Your material cost is $25,000. Your customer tells you that his uncle had $5,000 worth of lumber laying around his house. Your customer puts the lumber on the ground and he puts a window on the ground. Your customer tells you that you can have the lumber for free to use on his job if you will install the window for free at his uncle's house.

These are referred to as Strawman arguments. You set them up so that you can knock them down and have nothing to do with reality or the discussion. Regardless if he tells you that you can have the lumber for free, it is obvious that you are trading the lumber for the installation of the window. It is income. You gained by completing the service. It wasn't free, there was a condition in order to receive them.

According to everyone on this forum this is bartering. It is not!.The only thing that is going to happen is your material cost will be lower and you will earn more profit. At no time will you be obligated to report the materials you got for free.

This job has now become two separate jobs and doing the book keeping is not a problem. Just as the previous examples on other posts you only need to do your normal book keeping and you do not have to tell the IRS that someone gave you a window and lumber. The only thing the IRS cares about is the bottom line and your taxable income.

Again, you do. See my response at the end.

Your book keeping will be as follows:

Total Contract amount $50,000
Minus materials you paid cash for
Minus other expenses
= Total Profit

The free lumber and window never has to be reported to the IRS because you never paid for those materials and you did not make a profit directly from the free items you received. You now have a higher profit that was earned from your labor because you got the materials for free and it is only the profit that is important. The IRS does not need to be told that your profit is higher because your customer kicked in some free materials. If you think so, then that would be like saying if the customer hands you a new faucet and asks you to install it for free then you would be obligated to put that faucet on your books. You can't.

I am so positive that I am not even going to talk to my CPA about this.
Bartering is defined as exchanging goods or services for goods or services. If I install a window for lumber, I have exchanged a service for goods. That is bartering. We are not the one that is confused on definitions.

And it is nothing like your faucet example. If he gave you the faucet in exchange of installing another faucet. I am scratching my head why you are arguing with something that you are so confused on.

The IRS cares about all income and all expenses. They want to see your total gross income and total gross costs. That is how they determine your taxable income.

How you record it is up to you, but you are required by law to report the faucet, water heater or stack of lumber as income. It's that simple. And you are wrong, the lumber has to be reported as income. It may be a net neutral income but you still have to report it as income.

I'll post it again for you since you are clearly ignoring what the IRS actually says you are to do and are making up your own IRS rules and definitions.

You must include in gross income in the year of receipt the fair market value of goods or services received from bartering.
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Old 01-15-2015, 11:37 AM   #25
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Re: Entering A Job Payment As Store Credit In QB...??


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Bartering is defined as exchanging goods or services for goods or services. If I install a window for lumber, I have exchanged a service for goods. That is bartering. We are not the one that is confused on definitions.

And it is nothing like your faucet example. If he gave you the faucet in exchange of installing another faucet. I am scratching my head why you are arguing with something that you are so confused on.

The IRS cares about all income and all expenses. They want to see your total gross income and total gross costs. That is how they determine your taxable income.

How you record it is up to you, but you are required by law to report the faucet, water heater or stack of lumber as income. It's that simple. And you are wrong, the lumber has to be reported as income. It may be a net neutral income but you still have to report it as income.

I'll post it again for you since you are clearly ignoring what the IRS actually says you are to do and are making up your own IRS rules and definitions.

You must include in gross income in the year of receipt the fair market value of goods or services received from bartering.
I totally disagree. If the customer purchases the materials, or a faucet you do not include the cost of that faucet in your records. You do not tell the IRS what the customer paid for the faucet. As far as you are concerned the customer got the faucet for free, paid $1, or paid $1,000. The only thing you need to report is what pertains to the profit that you earned. You do book keeping for your profit and if the IRS has a problem with that then you produce a contract that states, "Installed customer's parts."

Almost every contract involves bartering. Almost every job includes some type of bartering when the contractor is doing the bidding and negotiating. You quote a price and the customer asks if you will do a little more, or you you remove things from the scope of work. A high percent of jobs include bartering when you quote a price and reduce the price when the customer wants to purchase their own materials. Not all bartering requires strict IRS monitoring and neither does a simple job where the customer trades materials for services and the contractor reports his income. The IRS does not care about how the paperwork is done as long as the final numbers are correct.
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Old 01-15-2015, 11:56 AM   #26
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Re: Entering A Job Payment As Store Credit In QB...??


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I totally disagree. If the customer purchases the materials, or a faucet you do not include the cost of that faucet in your records. You do not tell the IRS what the customer paid for the faucet. As far as you are concerned the customer got the faucet for free, paid $1, or paid $1,000. The only thing you need to report is what pertains to the profit that you earned. You do book keeping for your profit and if the IRS has a problem with that then you produce a contract that states, "Installed customer's parts."

Almost every contract involves bartering. Almost every job includes some type of bartering when the contractor is doing the bidding and negotiating. You quote a price and the customer asks if you will do a little more, or you you remove things from the scope of work. A high percent of jobs include bartering when you quote a price and reduce the price when the customer wants to purchase their own materials. Not all bartering requires strict IRS monitoring and neither does a simple job where the customer trades materials for services and the contractor reports his income. The IRS does not care about how the paperwork is done as long as the final numbers are correct.
You totally misunderstood what I said. I was saying if they had two faucets. One that you install and one you keep as payment for installing the first faucet.

I never said that you include materials the customer provides for you to install. You only include materials you receive as compensation for services rendered.

Bartering is not negotiating. You are not bartering if you reduce your price or if they supply materials. That is not the definition if bartering.

Again, bartering is when one party trades a good or service for a god or service.

The IRS absolutely cares about every penny you earn whether it is cash or barter.

Bottom line is the IRS requires you to report all income, PERIOD! Anything else is tax fraud.
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Old 01-15-2015, 12:10 PM   #27
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Re: Entering A Job Payment As Store Credit In QB...??


That a corgi puppy in your avatar photo?
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Old 01-15-2015, 01:54 PM   #28
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YEP! Best bud has a Corgi (Big Butt's her name). Luv that little idiot.
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Old 01-15-2015, 02:00 PM   #29
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Re: Entering A Job Payment As Store Credit In QB...??


I didn't mean to start a WAR here guys!! Just wanted to find the right (hopefully EASY) way to account for being paid for my services with store credit. No big thang! I want to avoid accounting hassles and report my (and my partner's) REAL income in QB, that's all. Just can't figure HOW to do this so it washes out correctly. I want the store credit to count as real income. Last year, I sort of fudged it since it was middle of the year and all. But this is a new year and I want to be as legit as possible, I'll sleep better at night.
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Old 01-15-2015, 02:03 PM   #30
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YEP! Best bud has a Corgi (Big Butt's her name). Luv that little idiot.
That must of been when she was a puppy. When they get older, their gack legs can do that, but they can't throw their front legs out like that anymore.

They are great dogs
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Old 01-15-2015, 04:11 PM   #31
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Re: Entering A Job Payment As Store Credit In QB...??


It's not all the same to you or to the tax authorities whether you report income in this period or the next, which is why you report it in the period you receive it. The OP needs to get advice from someone who knows the right accounting entry - I can't believe that it is difficult or would be confusing to anyone.
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Old 01-15-2015, 05:50 PM   #32
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Re: Entering A Job Payment As Store Credit In QB...??


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You totally misunderstood what I said. I was saying if they had two faucets. One that you install and one you keep as payment for installing the first faucet.

I never said that you include materials the customer provides for you to install. You only include materials you receive as compensation for services rendered.

Bartering is not negotiating. You are not bartering if you reduce your price or if they supply materials. That is not the definition if bartering.

Again, bartering is when one party trades a good or service for a god or service.

The IRS absolutely cares about every penny you earn whether it is cash or barter.

Bottom line is the IRS requires you to report all income, PERIOD! Anything else is tax fraud.
The deal between the contractor and the customer is not bartering that has tax consequences and the transactions do not have to be reported to the IRS.

If I trade you a bushel of apples for a bushel of oranges of equal value then that is bartering. There is no need to report this trade to the IRS because there was no profit.

If I trade you work for materials then I did labor and have a capital gains when receiving the materials.

If I trade work for materials and use those materials on another job then I do not have a capital gains as a result of the material trade. I have a capital gains for only labor and the materials are a wash.

If I have some materials remaining and I want to be an angel then I can create a list of the materials I claim a capital gains tax for the materials I have left. If the IRS questions my actions I will give them a copy of the contracts for both jobs and my contracts will state the facts regarding the materials swap that had no capital gains.

It is ridiculous to try to incorporate a material swap that had no capital gains as a result of that swap. I am not going to waste my time telling the IRS that I traded a bushel of apples for a bushel of oranges of equal value. That is the question in this thread.

There is no tax fraud as long as you pay the taxes you are suppose to pay. The IRS does not tell you how to do your books as long as tot totals are correct. When you report your taxes you never include everything that occurs and when the IRS questions you then they will request copies of your contracts and invoices.

I know the exact definition of bartering. While it is not explained in the dictionary term, negotiating prices has always been loosely defined as bartering i.e., "I went to the swap meet, the vendor wanted $500 and I got it for $400 after a little bartering."

I'm will not respond any more unless you can show me how and why you would report a swap that has no tax consequences. The only thing that is taxable for the subject in this thread is the profit from the labor for doing the swap of materials.
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Old 01-15-2015, 07:12 PM   #33
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Re: Entering A Job Payment As Store Credit In QB...??


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Bottom line is the IRS requires you to report all income, PERIOD! Anything else is tax fraud.
You are totally correct, this is income for the OP. PCplumber needs to read the tax code.
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Old 01-15-2015, 07:22 PM   #34
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Re: Entering A Job Payment As Store Credit In QB...??


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The deal between the contractor and the customer is not bartering that has tax consequences and the transactions do not have to be reported to the IRS.

If I trade you a bushel of apples for a bushel of oranges of equal value then that is bartering. There is no need to report this trade to the IRS because there was no profit.

If I trade you work for materials then I did labor and have a capital gains when receiving the materials.

If I trade work for materials and use those materials on another job then I do not have a capital gains as a result of the material trade. I have a capital gains for only labor and the materials are a wash.

If I have some materials remaining and I want to be an angel then I can create a list of the materials I claim a capital gains tax for the materials I have left. If the IRS questions my actions I will give them a copy of the contracts for both jobs and my contracts will state the facts regarding the materials swap that had no capital gains.

It is ridiculous to try to incorporate a material swap that had no capital gains as a result of that swap. I am not going to waste my time telling the IRS that I traded a bushel of apples for a bushel of oranges of equal value. That is the question in this thread.

There is no tax fraud as long as you pay the taxes you are suppose to pay. The IRS does not tell you how to do your books as long as tot totals are correct. When you report your taxes you never include everything that occurs and when the IRS questions you then they will request copies of your contracts and invoices.

I know the exact definition of bartering. While it is not explained in the dictionary term, negotiating prices has always been loosely defined as bartering i.e., "I went to the swap meet, the vendor wanted $500 and I got it for $400 after a little bartering."

I'm will not respond any more unless you can show me how and why you would report a swap that has no tax consequences. The only thing that is taxable for the subject in this thread is the profit from the labor for doing the swap of materials.
I'm really thinking you are just arguing to argue.

You have to report your gross income, PERIOD!!! It's that simple. It's not the only thing you report, but you have to report it. Did you not read what I posted from the IRS? It says you have to include the fair market value of the battered item. It doesn't say anything about capital gains or profit.

I am amazed that you run a multi million dollar operation but don't understand basic tax reporting.

I will repeat that I am not saying it is all taxable, however you have to report your gross income along with your deductions. It all goes on the form you file.

Funny that you won't respond until I provide proof. I already have. You haven't provided any proof but you ignorant opinion.

Please stop responding until you provide proof that you are not required to show your gross income to the IRS.

Please stop responding until you show you understand the IRS definition of bartering.
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Old 01-15-2015, 11:02 PM   #35
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Re: Entering A Job Payment As Store Credit In QB...??


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I'm really thinking you are just arguing to argue.

You have to report your gross income, PERIOD!!! It's that simple. It's not the only thing you report, but you have to report it. Did you not read what I posted from the IRS? It says you have to include the fair market value of the battered item. It doesn't say anything about capital gains or profit.

I am amazed that you run a multi million dollar operation but don't understand basic tax reporting.

I will repeat that I am not saying it is all taxable, however you have to report your gross income along with your deductions. It all goes on the form you file.

Funny that you won't respond until I provide proof. I already have. You haven't provided any proof but you ignorant opinion.

Please stop responding until you provide proof that you are not required to show your gross income to the IRS.

Please stop responding until you show you understand the IRS definition of bartering.
There is no gross income to report. If you trade a bushel of apples for a bushel of oranges there is no gross income, no income at all and no income to report.

If you trade material for one job to another job there is no income from the trade. There is only income for the labor for doing the swap.

That is not the first time you called me stupid! Maybe, I am!

The questions is regarding how to do your taxes if you trade materials for work. If you use those materials on another job then you did not generate income from the materials. You cannot use a cash deduction on your records if you did not pay cash for the materials. You did labor to get those materials. You made your money from the labor you worked for and not from the materials. Therefore, you claim only the labor on your tax records and if you want to make the IRS understand how you traded materials then write the details on all the contracts involved.

If my mother gives be a faucet for free and I install that faucet at a customer's home for $300, then I did not make a profit on the faucet. I did not pay cash for that faucet and I do not have to put that faucet on my tax records. If I did not pay cash for the faucet there is no way I can say I purchased that faucet and put it on my tax records. I have to claim that I earned $300 for the labor.

The real truth is I don't have to tell the IRS one damn thing about the faucet. All I really do is total my gross receipts, deduct my expenses and I have my taxable income. Does the IRS really care where you get your materials from. Do you have to report material values on your tax returns if you get them for free and install those materials in a contract. If my father is building a house and he gives me $5,000 worth of lumber do I have to tell the IRS that I used that lumber on a house I built for a customer. No! The IRS does not care where you get your materials from. They only care about your net profit and taxable income. I can steal all my materials from a lumber yard, build a house and the IRS is not going to ask where I got the materials.

The only thing I have to account for is the $300 I charged for labor. I gave the customer the faucet for free and I installed it for $300. I can even say that my invoice states that I charged the customer $100 for the faucet and $200 for the labor, but now you have a problem because you may have to pay sales tax for putting a phantom price on the faucet and the faucet is not a re-sale because you never purchased it in the first place.

In the case that this thread is about how can the contractor file his re-sale taxes when he never purchased the materials. In essence, he got the materials for free in trade for his labor. How can you claim a cash value for materials you never purchased. You can't put a dollar amount on your tax records for materials you did not pay cash for. The only thing you can claim on your tax records is the profit from the labor that you generated. You cannot just put wild numbers for materials on your tax records.

You talk about being honest with the IRS. Start putting dollar amounts for materials you did not purchase with cash and you will open up a can of worms.

Dear Mr. Contractor:

You are under investigation because you put $5,000 on your tax return for materials you did not pay cash for. Where and how did you determine the cash value for these materials and where are these materials now. Please explain the profit or loss for the materials you traded and explain how you can have a deduction or loss for materials you did not pay for.

Dear Mr. IRS Investigator:

I did not make one penny from the materials, but since I want to be an angel I thought I would put on my tax records that I traded materials for labor and then used those materials on another job. I did not make one penny on the materials and in the end I profited $900 for my labor. I thought I would throw in some wild numbers regarding the value of the materials so you would know that I am honest.

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Old 01-15-2015, 11:42 PM   #36
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Re: Entering A Job Payment As Store Credit In QB...??


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There is no gross income to report. If you trade a bushel of apples for a bushel of oranges there is no gross income, no income at all and no income to report.

Okay, once again, this is a strawman argument that has nothing to do with the discussion.

If I do $500 worth of services, I am owed $500. I can accept the payment in another form. If I choose top accept $500 in goods and services, this is called bartering. That is $500 in income.

This is what we have been discussing, not trading a bushel of apples for a bushel of oranges. Which, BTW, is still considered bartering and you would still need to report that as income. You would need to show the fair market value of the apples and the fair market value of the oranges.

If the apples were worth more than the orange, you would report a loss.

If the apples were worth less than the oranges, you would report a profit.

In either case you would need to report the barter as an income per the IRS rule that I have quoted a few times in this thread.


If you trade material for one job to another job there is no income from the trade. There is only income for the labor for doing the swap.

You seriously don't understand the term income. It just means what is coming in. It is not to be confused with profit. The rules of my above answers apply to this scenario as well. Even though they may be equal in value, you would record the new materials as income and the ones you traded as an expense.

That is not the first time you called me stupid! Maybe, I am!

Still confused with what I have said. I said ignorant. Look up the definition of ignorant and stupid. They are not the same. Ignorant means that you lack knowledge. Which is painfully clear.

The questions is regarding how to do your taxes if you trade materials for work. If you use those materials on another job then you did not generate income from the materials. You cannot use a cash deduction on your records if you did not pay cash for the materials. You did labor to get those materials. You made your money from the labor you worked for and not from the materials. Therefore, you claim only the labor on your tax records and if you want to make the IRS understand how you traded materials then write the details on all the contracts involved.

Maybe one more explanation will help. If I trade materials for work, that is considered income. You did something and recieved something for it. The it does not have to be money to be considered income. Someone else explained it to you already.

If you were paid money instead of material and then used that money on to buy the same material, the money was income from another job. Just because it is material, doesn't exclude it from being income. You are to assess a fair market value and report that as part of your gross income.


If my mother gives be a faucet for free and I install that faucet at a customer's home for $300, then I did not make a profit on the faucet. I did not pay cash for that faucet and I do not have to put that faucet on my tax records. If I did not pay cash for the faucet there is no way I can say I purchased that faucet and put it on my tax records. I have to claim that I earned $300 for the labor.

This is a gift scenario. Gifts are handled differently on your taxes, but you are required, by law, to report certain gifts. Again paying cash for something doesn't change it's status.

The real truth is I don't have to tell the IRS one damn thing about the faucet. All I really do is total my gross receipts, deduct my expenses and I have my taxable income. Does the IRS really care where you get your materials from. Do you have to report material values on your tax returns if you get them for free and install those materials in a contract. If my father is building a house and he gives me $5,000 worth of lumber do I have to tell the IRS that I used that lumber on a house I built for a customer. No! The IRS does not care where you get your materials from. They only care about your net profit and taxable income. I can steal all my materials from a lumber yard, build a house and the IRS is not going to ask where I got the materials.

Again this is a gift scenario. But yes you gained $5000, you are required to report that as income. I'm sketchy on those rules, but the IRS wants a chunk of any income.

The only thing I have to account for is the $300 I charged for labor. I gave the customer the faucet for free and I installed it for $300. I can even say that my invoice states that I charged the customer $100 for the faucet and $200 for the labor, but now you have a problem because you may have to pay sales tax for putting a phantom price on the faucet and the faucet is not a re-sale because you never purchased it in the first place.

In the case that this thread is about how can the contractor file his re-sale taxes when he never purchased the materials. In essence, he got the materials for free in trade for his labor. How can you claim a cash value for materials you never purchased. You can't put a dollar amount on your tax records for materials you did not pay cash for. The only thing you can claim on your tax records is the profit from the labor that you generated. You cannot just put wild numbers for materials on your tax records.

I missed the part about sales tax. I am pretty sure that this thread has nothing to do with sales tax. I am under the impression it is about income and how to record it in QB (which I should everyone the link on how to do it) as well as paying his partner and himself from the gain.

You talk about being honest with the IRS. Start putting dollar amounts for materials you did not purchase with cash and you will open up a can of worms.

It's called fair market value. It is a very common term used by the IRS and accountants.

Dear Mr. Contractor:

You are under investigation because you put $5,000 on your tax return for materials you did not pay cash for. Where and how did you determine the cash value for these materials and where are these materials now. Please explain what your profit or loss for the materials you traded.

You would never receive a letter like this. But if you did, you would assign it a fair market value. Fair market value is just that. What are those materials worth on the open market. What would someone think was a fair price. You would look no further than any vendor who sold those goods.

Dear Mr. IRS Investigator:

I did not make one penny from the materials, but since I want to be an angel I thought I would put on my tax records that I traded materials for labor and then used those materials on another job. I did not make one penny on the materials and in the end I profited $900 for my labor. I thought I would throw in some wild numbers regarding the value of the materials so you would know that I am honest.
Pretty much. It's not being an angel, but just reporting all of your income and expenses to determine you tax liability. I am not sure why you are having such a hard time grasping such a simple concept. It makes me wonder how in the world you have survived this long.

Here's something from another article from the IRS:

Here are four facts about bartering:
Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually. The exchange must give a copy of the form to its members and file a copy with the IRS.

Bartering income. Barter and trade dollars are the same as real dollars for tax reporting purposes. If you barter, you must report on your tax return the fair market value of the products or services you received.

Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.

Reporting rules. How you report bartering varies depending on which form of bartering takes place. Generally, if you are in a trade or business you report bartering income on Form 1040, Schedule C, Profit or Loss from Business. You may be able to deduct certain costs you incurred to perform the bartering.


http://www.irs.gov/uac/Newsroom/Four...-if-You-Barter

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Old 01-16-2015, 08:55 AM   #37
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Re: Entering A Job Payment As Store Credit In QB...??


Sounds like nobody is changing their minds. Talk to your respective CPA's.

To the OP. Here's one method of entering a barter transaction:
http://support.quickbooks.intuit.com...icles/HOW19465

One of the problems with accounting is that there are frequently a few different ways of creating accounts to achieve the same end result. It's usually best to have your accountant or bookkeeper show you how they like to have the accounts set up.
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Old 01-16-2015, 08:28 PM   #38
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Re: Entering A Job Payment As Store Credit In QB...??


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Sounds like nobody is changing their minds. Talk to your respective CPA's.

To the OP. Here's one method of entering a barter transaction:
http://support.quickbooks.intuit.com...icles/HOW19465

One of the problems with accounting is that there are frequently a few different ways of creating accounts to achieve the same end result. It's usually best to have your accountant or bookkeeper show you how they like to have the accounts set up.
The information in that link is more confusing that this entire thread. Try reading the Community questions and answers and even though the writer is not the final authority he states that receiving credit for work instead of cash is not bartering. He says it is only trading credits meaning that the vendor gives you credit for doing the work and you are giving the vendor credit for your labor.

After reading Quickbook's instructions regarding bartering I know I don't have the mental capacity to do it.

This is the simplest solution to do your books for bartering.

You do work for the vendor and want to trade materials. Have the vendor pay you with a check and at the same time you write him one of your checks for the value of the materials. Boom!!! You made an even trade, you don't owe the IRS one penny and you enter the credit and debit in your Quickbooks, or whatever system you use and your books will show a zero balance with no capital gains.

If each party trades checks of equal value then that trading work for materials for work is not bartering and there is a capital gains.

Lets take this one step further. We trade checks of equal value and both parties tear their checks to shreds. Neither party owes the other one penny. Now, you can go to your regular checking account records and enter:

You put these entries in an Assets category so the entries do not affect your checking account.

DEBIT: XYZ Company owes me $5,000 (This is for the work you did)
CREDIT: XYZ Company paid me $5,000 (This is for the materials you received.

Your balance will be zero for XYZ company and this will not affect your checking account balance

The thing I don't like about Quickbooks is it does too many things and you need to go to school to learn how to use the system. Quickbooks puts things in too many places and it is difficult to understand what the software is doing with entries. The nice thing about the software, in my link below, is it is simple to create an Assets Category, track it and it will not affect your checking account balance.
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Old 01-16-2015, 08:39 PM   #39
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Re: Entering A Job Payment As Store Credit In QB...??


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I'll post it again for you since you are clearly ignoring what the IRS actually says you are to do and are making up your own IRS rules and definitions.
Maybe you should keep posting it. I figure if you keep using brighter colors and bigger letters every time you post it, somehow that will make it more true and believable.
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Old 01-16-2015, 08:54 PM   #40
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Re: Entering A Job Payment As Store Credit In QB...??


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Maybe you should keep posting it. I figure if you keep using brighter colors and bigger letters every time you post it, somehow that will make it more true and believable.
I gave up after my last post. He is just SOS. He doesn't get that when you do work there are costs, profits and reporting of your income regardless of profit. It doesn't matter if it is a wash, you still have to report it in the gross income box.

And that brings up another thing...there is a difference between income, profit and capital gains. He keeps saying capital gains, but unless you sell a property, stock, bond...you are just making profit off of ordinary income. There has to be a "capital investment".

And if he doesn't understand these basic accounting principles, stay away from his software. You will be screwed.

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