IRS tax trouble can leave you with your hair turning gray, so it’s imperative to leave yourself in good standing with the IRS. There are some ways that you can still do some bartering and still keep the IRS happy. Since the IRS wants you to report cash income (they see bartering as cash income), the next time you get into a situation to make a bartering trade, make sure you draw up a contract stating the terms; exactly the same way you would do for any other contractor.
The IRS doesn’t care about any shortcomings you may have or the difficulty of trying to run a business despite a faltering economy. They care about getting their cut of your money. That’s why it is so important to claim any substantial amount of work that you may have completed or bartered.
The simple fact is that the U.S economy is largely made up of the income of small businesses – i.e. restaurants, bars, construction companies, retail companies, and so on. These are the companies that the government has a concentrated focus on, especially over the last five years. To most of the small business owners, this makes them angry. Consider all of the government bailouts of giant corporations that the average tax payer is going to pay for.
Nevertheless, the main way to stay out of IRS tax trouble for as a small business owner is to not be complacent about your record keeping. Be vigilant with your receipts and always make sure that you make a contract for any bartering. This gives you armament if you do ever get audited. In this brutal economy, you need to have as many advantages as you can. One is to avoid IRS trouble at all costs.
There comes a time that virtually every small business owner and entrepreneur tries to stick a little cash under the rug. Although you shouldn’t feel bad about it in this ‘Dog Eat Dog’ world, Uncle Sam certainly will come after you with his pointy finger in your face. Especially if you are a small business owner. Hiding money can be the number one way to get the IRS churning through your finances with a fine tooth comb. Even though one of the advantages to having your own company is being able to bend the rules, it can also be a cat and mouse game that the government hates.