Bartering Services to Combat the Recession

A new trend of bartering services or simply offering good deeds without pay to others less fortunate is catching on. Please consider Trading Good Deeds At Estonia's Bank of Happiness.

To become a client [of the Bank of Happiness], an Estonian must register online, listing the useful things that he can do for others (eg, grocery shopping, walking a dog, fixing cars) and those that he would like done unto him (eg, having a suit darned or windows cleaned).

�We call it a bank because we want to bring forth a new set of values�, says Tiina Urm, a 26-year-old who helped to think up the idea and is the closest thing that the Bank of Happiness has to a manager. �We just want to create a network where people don�t pay for what they need but get it from each other. It�s a way of allowing people, especially those who have lost their jobs, to keep doing what they do � and to bring people together.�

The Bank of Happiness is not necessarily peddling reciprocation � a teenager might fetch a weekly shop for an elderly neighbour, even if the neighbour would be unable to do much in return. Instead, a stranger who has seen the good deed listed by the neighbour online will step in to help the teenager.

The bank is hoping to create virtuous arcs, rather than circles, of unadulterated altruism all over Estonia, with the feeling of goodness serving as its own reward. The helper also receives tangible evidence of his kindness: a �banknote� � printable from the bank�s website � offered by the grateful recipient in lieu of money, inscribed on the back with the date and nature of the deed. The note can then be passed on to another good Samaritan. And there is no system of equations to codify how one deed compares with another; the system will be self-regulatory.

If you think that this sounds like a recipe for freeloading, then you, like me, underestimate the optimism running through Estonian veins. Every young person I stopped to ask about it � the older ones tended not to speak English � said that they would register.

Airi Kivi, a psychologist and family therapist working with Urm, reveals that they considered releasing only a prescribed number of BOH banknotes � each marked Tanutaht, meaning �thank you� � into circulation. But they ran into legal problems, because a limited print run made it resemble a real currency. An infinity of banknotes is, anyhow, appropriate to the cause; the milk of human kindness should come in a bottomless jug.

Another figure closely identified with the Bank of Happiness is Rainer Nolvak, an Estonian internet entrepreneur who now runs Curonia Research, a company that specialises in technology start-ups.

Nolvak, already well-known in his home country, he came to international prominence last year when he suggested a national clean-up day called Let�s Do It 2008. On May 3 last year, 50,000 Estonians � 3 per cent of the population � rallied to the cause, arriving at the dumps with spades and plastic bags. An operation that would otherwise have taken three years and cost about �20 million took one day (give or take a few months of planning) and cost only �500,000.

Nolvak realised that the clean-up day achieved much more than pristine forests. �On that day, people were happy afterwards. It made me think � this is how work was done 100 years ago,� he says. �It wasn�t just boring old work, it was done collectively and gave us a feeling of connectedness.�

And so the idea of the Bank of Happiness was born: �It is based on the assumption that doing good is good for you. It will touch everyone with a conscience.�

He believes that anyone taking advantage of the scheme will soon be �outed� online. After all, trust is the key component of an altruistic economy and those abusing it are no better than fraudsters.

Money-free trading systems exist all over the world, including in the UK. Here they are known as local exchange trading systems (lets) and each has its own notional currency (in Milton Keynes it is the �concrete cow�, or CC). Members of MKLetNet pay �10 for mailings plus 20 CCs to get a directory listing what other people want and can offer, with contact details. The exact details of each transation are left to members but, once agreed, the deals are registered with a lets accountant.

The trouble with a money-free system is working out how different services compare. For example, how does a babysitter, who may charge �8 an hour, exchange services with a plumber, who may charge �40 an hour?

One solution is to value everyone�s time equally; this is the basis of time banks. One hour equals one time credit; the aim is to maintain a balance of zero, meaning that you have given as much time as you have received. An estimated 300 lets and time banks operate in Britain, numbering 100,000 people.

The time banking movement was set up Dr Edgar Cahn in America. Cahn�s view was that �the real work of society, which is caring, loving, being a citizen, a neighbour and a human being� was not addressed by market economics.

Government Wants Its Cut

In the US, the Bank of Happiness would likely get raided by the IRS. Participants would be subject to an official crackdown asking for back taxes and huge penalties.

To understand why, please see Internal Revenue Service guidelines on Topic 420 - Bartering Income.

Bartering occurs when you exchange goods or services without exchanging money. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services. The fair market value of goods and services received in exchange for goods or services you provide must be included in income in the year received.

The Internet has provided a medium for new growth in the bartering exchange industry. This growth prompts the following reminder: Barter exchanges are required to file Form 1099-B for all transactions unless certain exceptions are met.

If you receive income from bartering, you may be required to make estimated tax payments. Refer to Publication 525, Taxable and Nontaxable Income, for additional information.

Bartering Services Required To Report Members

Please note that bartering services are required to report members as per IRS Tax Requirements for Barter Exchanges.

Under Regulation 1.6045-1(f)(i), barter exchanges are required to make a return of information reporting the name, address, and taxpayer identification number of each member or client providing property or services in the exchange, the property or services provided, the amount received by the member or client for such property or services, the date on which the exchange occurred and other information required on Form 1099-B. This means that multiple Forms 1099-B may be required for member clients with multiple bartering transactions during the year. To learn more about 1.6045-a(f)(i), Returns of Information of Broker and Barter Exchanges, visit the Electronic Code of Federal Regulations site, click on "Simple Search" and enter 26 in the Title and "Returns of information of brokers and barter exchanges." in the "Search for" field.

Penalty for Not Filing or Filing Incorrect Forms 1099-B

Failure to file Forms 1099-B can result in significant penalties under Internal Revenue Code Section 6721. The penalty is based on when correct information returns are filed. The penalties are:

• $15 per information return if filed correctly within 30 days of the specified due date with a maximum penalty of $75,000 per year ($25,000 for small businesses).
• $30 per information return if filed correctly more than 30 days after the due date, but by August 1 with a maximum penalty of $150,000 per year ($50,000 for small businesses).
• $50 per information return if filed after August 1, or not filed, with a maximum penalty of $250,000 per year ($100,000 for small businesses).
• A minimum of $100 for each unfiled information return for intentional disregard.

If you want to barter in the US, Uncle Sam wants to tax you on it. For private individuals to be subject to this sort of nonsense is of course ridiculous.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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