Updated October 24, 2026. Quick answer: Tax Topic 420 is the IRS page on bartering, the exchange of goods or services. It says the fair market value of what you receive is gross income in the year you receive it. Barter exchanges file Form 1099-B, and the income goes on Schedule C or Schedule 1.
Quick reference
| Item | What the IRS topic says |
|---|---|
| What bartering is | “Bartering is the exchange of goods or services.” |
| Cash involved | “In bartering, usually there’s no exchange of cash.” |
| What you include | “You must include in gross income in the year of receipt the fair market value of goods or services received from bartering.” |
| Who files Form 1099-B | “Barter exchanges are required to file Form 1099-B, Proceeds From Broker and Barter Exchange Transactions for all transactions unless an exception applies.” |
| Estimated tax | “If you receive income from bartering, you may be required to make estimated tax payments.” |
What bartering is
The topic starts with a plain definition: “Bartering is the exchange of goods or services.” It gives an example: “An example of bartering is a plumber exchanging plumbing services for the dental services of a dentist.” It also notes “In bartering, usually there’s no exchange of cash.”
Information returns
The topic separates trades made through a barter exchange from other trades. For exchanges it says “Barter exchanges are required to file Form 1099-B, Proceeds From Broker and Barter Exchange Transactions for all transactions unless an exception applies.” On the member side it says “If you exchange property or services through a barter exchange, you should receive a Form 1099-B.”
For trades outside an exchange, the topic says “Persons who don’t contract with a barter exchange or who don’t barter through a barter exchange but who trade services, aren’t required to file Form 1099-B.” It then adds “However, they may be required to file Form 1099-MISC, Miscellaneous Information.” Our page on Form 1099-MISC covers that form.
Reporting the income
The topic says “You must include in gross income in the year of receipt the fair market value of goods or services received from bartering.” On where it goes, it says “If you receive income from bartering in connection with your business, you will generally report this income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship).”
For other cases it says “Otherwise, you will generally report this income directly on Schedule 1 (Form 1040), Additional Income and Adjustments to Income”. The related pages on Schedule C and Schedule 1 describe those forms.
Estimated tax
The topic closes with a note on payments during the year: “If you receive income from bartering, you may be required to make estimated tax payments.” It points readers to Form 1040-ES. Our page on Form 1040-ES covers it.
Where this comes from
This page describes the IRS page titled Topic no. 420, Bartering income, as served on irs.gov on October 24, 2026. The IRS page shows that it was last reviewed or updated on 08 Oct 2026. The IRS can change a topic after we read it, and the IRS page controls. General information, not tax or legal advice.
Common mistakes
- Thinking a trade with no cash is not income. The topic says to include “the fair market value of goods or services received from bartering”.
- Waiting for a Form 1099-B before reporting. The topic ties the income to “the year of receipt”, not to a form.
- Assuming every trade produces a Form 1099-B. The topic says people who trade outside an exchange “aren’t required to file Form 1099-B”.
- Using one form for every case. The topic splits business income to Schedule C from other income to Schedule 1.
Related: IRS tax topics by number, Form 1099-MISC, Schedule C (Form 1040), Schedule 1 (Form 1040), Form 1040-ES, and Quarterly estimated taxes in the first year of self employment.
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Answer againSources
- IRS, Topic no. 420, Bartering income (irs.gov): https://www.irs.gov/taxtopics/tc420
- IRS, Tax topics index (irs.gov): https://www.irs.gov/taxtopics
Read from the IRS pages linked above on October 24, 2026. General information, not tax or legal advice. The IRS topic page and the instructions for your own form control, and your own facts decide the outcome.