What are tax consequences of bartering?

Cash is hard to come by these days. So it's not unusual to see barter arrangements between taxpayers.

You've probably even done a little of this yourself: You've designed someone's Web site in exchange for "free" handyman services, or you've done someone's taxes in exchange for a new Coach briefcase. In either case, whether it's the exchange of goods or services for other goods or services, it's a barter.

No money actually changes hands, so it's almost as if the transaction didn't happen, right? Not exactly. The fair market value of goods and services that you receive in exchange for goods or services you provide must be included as income on your tax return even though you don't receive payment in a traditional way.