Background

The IRS treats barter and gig economy income as taxable. Barter income is the fair market value (FMV) of services or goods you receive in exchange for what you provide. Gig work — driving, delivery, freelancing, selling on marketplaces — is usually self-employment income. Reporting these income types correctly reduces audit risk and ensures proper calculation of income and self-employment tax (see IRS guidance on barter income and self-employment tax for details: https://www.irs.gov/businesses/small-businesses-self-employed/reporting-barter-income; https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax).

How to report it (step-by-step)

  1. Determine fair market value. Record the FMV of goods or services you receive in barter or in-kind exchanges. Use comparable market prices, invoices or an estimate based on what you would charge in cash.

  2. Classify the income. Most gig and barter income earned in a trade or business is reported as self-employment income on Schedule C (Form 1040). If you have net earnings of $400 or more, you generally owe self-employment tax and must file Schedule SE (https://www.irs.gov/forms-pubs/about-schedule-se). If you’re not in a trade or business, different rules may apply.

  3. Report information returns. Platforms and barter exchanges may send information returns: Form 1099-NEC (nonemployee compensation) or Form 1099-K (payment card/third-party network) from marketplaces and payment processors, and barter exchanges commonly issue Form 1099-B for proceeds (https://www.irs.gov/forms-pubs/about-form-1099-k; https://www.irs.gov/forms-pubs/about-form-1099-nec). Whether or not you receive a form, you must report income.

  4. Claim business expenses. Report ordinary and necessary expenses related to your gig or barter activity on Schedule C to reduce taxable profit. Keep receipts and contemporaneous records. Common deductions include supplies, mileage, home office (when eligible), and fees paid to platforms.

  5. Pay self-employment and estimated taxes. If you expect to owe $1,000 or more when filing, make quarterly estimated tax payments to avoid penalties (https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes). Self-employment tax covers Social Security and Medicare on net earnings.

Key forms you’ll likely use

  • Schedule C (Profit or Loss From Business) — report gross income and expenses.
  • Schedule SE (Self-Employment Tax) — calculate Social Security and Medicare tax if net earnings ≥ $400.
  • Form 1099-NEC or Form 1099-K — information returns you may receive from clients or platforms.
  • Form 1099-B — may be issued by organized barter exchanges for barter transactions.

Practical examples

  • Barter: You trade $800 worth of bookkeeping for $800 of website work. Both parties report $800 of income (FMV) for the services they received.
  • Gig: A delivery driver reports gross receipts from all platform payments and tips on Schedule C, subtracts driving expenses, and uses Schedule SE to compute self-employment tax.

Recordkeeping checklist

  • Date, description and FMV of goods/services exchanged.
  • Copies of invoices, receipts, bank and payment-processor statements.
  • Records of expenses tied to the activity (receipts, mileage logs).
  • Copies of any 1099-K, 1099-NEC, 1099-B or other information returns you receive.

Common mistakes to avoid

  • Not reporting income because you didn’t receive a 1099 — forms are informational; taxable income exists even without a form.
  • Underestimating FMV for barter transactions.
  • Forgetting to pay self-employment tax or failing to make estimated payments.
  • Mixing personal and business expenses without documentation.

Professional tips (from practice)

In my practice I recommend tracking every transaction as it happens — even small exchanges — and reconciling platform statements monthly. Use accounting software or a simple spreadsheet to capture FMV, gross receipts, and related expenses. When in doubt about whether an exchange counts as a business activity, treat it conservatively and ask a tax professional.

When to consult a pro

  • You trade goods or services through an organized barter exchange that issues 1099-B and you’re unsure how to report cost basis.
  • You have multiple platforms, complex expense allocations, or income across state lines.
  • You’re determining whether an activity rises to the level of a trade or business.

Common questions (brief answers)

  • Do I need to report barter income? Yes. Report the FMV of what you received (IRS: reporting barter income).
  • Is gig income taxable if I don’t get a 1099? Yes — you must report all taxable income even without an information return.

Helpful resources

Related guides on FinHelp

Disclaimer

This article is educational and not personalized tax advice. For guidance specific to your situation, consult a qualified tax professional or CPA.