I would like more information about "bartering" as a way to earn and report income and thereby earn social security credits.

[RickInFlorida]

I'm retired from the federal government, from which I receive a monthly annuity.  I worked in the private sector a bit before I started my federal career so I do have almost enough credits to receive social security.  I'm interested in what the IRS calls "bartering" as a way to earn the remaining credits.  (I'm aware of the offset for those receiving a federal annuity, which reduces, but does not preclude, social security benefits.)

I volunteered to teach English in Spain in exchange for room and board earlier this year. I estimate the value of the room and board to be about $1300 - exactly the amount needed for one social security credit.  If I report the value as income to the IRS for this type of situation, will social security credits accrue?  

So the question arises - what sorts of barter experiences will earn social security credits after I report the value of their benefits (usually room and board)?  For example, I'm also interested in volunteering at various retreat centers.  They typically discount their fee in exchange for work.  So if the fee were $1000 and I volunteer for a period of time and they give me a 50% discount, would I report $500 as income (toward social security credits)?  

How about volunteering as an usher in exchange for seeing live theater?  Would the value of the theatrical production be taxable thus earning me social security credits?  Thanks for any input.   

[Hal_Al · Accepted solution]

Generally, the IRS considered barter income as reportable and taxable. Barter income for services performed is generally self employment income and subject to self employment tax (SET).  SET is how the self employed pay their FICA tax. So, you might earn Social security credits for that income.

You can "google' barter as self employment income (or similar wording) and get lots of references, e.g. https://www.forbes.com/2009/11/11/irs-tax-barter-exchange-income-personal-finance-wood.html

Many of the activities, you've suggested, involve gray areas. For example, room and board provided at the convenience of the employer is not taxable. If the organization is an eligible charity, reimbursement of expenses for volunteering would not be taxable. Discounts generally are not income. Totally free, in exchange for services, might have pass muster, depending on all the circumstances.

[TaxGuyBill]

Even *IF* those activities are taxable, I DON'T see any of those activities as a "business" that would be subject to SE tax and eligible for SS credits.  You are volunteering, not running a business a with a motive to have a profit.

[Hal_Al]

TaxGuyBill makes a good point. What you describe is more like "Hobby" income than business income. That's a whole other IRS topic.
<a rel="nofollow" target="_blank" href="https://www.irs.com/articles/tax-tips-people-who-earn-income-hobby">https://www.irs.com/articles/tax...>

[SweetieJean]

It might make more sense to pick up some part time or seasonal work to get those SS credits.

[RickInFlorida]

Thank you all for your input.  SweetieJean, I did indeed obtain a part time job in order to earn the three remaining credits after earning the one credit from volunteering to teach English, so I'm hoping that paying income tax on the value of room and board while volunteering will earn me the fourth credit.  But I don't want to do anything I'm not supposed to do, and that's why I've turned to this forum for guidance.  

Volunteering to teach English is pretty far from a "hobby" for me.  It was hard work - ten plus hour days including activities - and I would not do it if it weren't for the room and board.  And I could make the case that it was like a business for me because I have training in teaching English and did so at a language school for salary before volunteering.  

I'm happy to pay the IRS income tax on the value of the room and board of $1300 in exchange for providing teaching services.  I'm assuming IRS's acceptance of my tax payment will automatically generate the anticipated social security credits.  So this is my question, since it's such a gray area with no easy answer:  have any of you ever heard of an IRS audit where the IRS tells the taxpayer he or she paid income tax that wasn't necessary and refund that money AND then also take back any social credits the taxpayer may have earned as a result?

[Hal_Al]

As a self employed person, you will file schedule C to report your business income (and expenses). You will also file schedule SE to pay your self employment tax. The IRS shares the info on schedule SE with the Social Security Administration and that is what gets you SS credit.
Even if you could make a case that the teaching income was a business, the room and board (for a temporary out of town job) is business expenses. After deducting your expenses, you have zero income. So you cannot get any SS credit, for the activity. You’re not allowed to forego claiming expenses to get a tax or SS benefit.

[RickInFlorida]

Hal, I did not pay for the room and board.  The room and board was given to me for free in exchange for my services.  That is the reason it appears to be "income," the opposite of an expense, and the reason for my question. I'm not clear why you consider it an expense.  I wonder if I'm missing something.

[RickInFlorida]

Would it be improper for me to post these and other related questions with a fresh new question?  There seems to be some uncertainty above and I'd like to see if anyone else can weigh in.

[Hal_Al]

Usually, it would be improper to start a new thread on the same subject. But it is not prohibited. So, go ahead and do it.
But, I'm pretty sure you will not get a definitive different  answer because of the circumstances.  At this post, you've have two knowledgeable people telling you they don't think you qualify for SS credits. That said, the IRS is unlikely to audit you if you do claim it, since you will be paying tax.

[TomD8]

The $1300 is reportable income, not an expense.  Per the IRS, when one product or service is exchanged for another, both parties must report the fair market value of the product or service they get as income on their tax return.  I think the income could be reported as self-employed business income on Schedule C, which would result in a Schedule SE.  IMO the poster, if challenged by the IRS, can make a good case that the teaching is a business and not a hobby - even though it is admittedly a bit of a gray area.  The poster should be able to demonstrate some objective basis for his $1300 FMV estimate.

[TaxGuyBill]

As I stated before, I don't see it as self employment income.  The OP said he "volunteered" to do it.  That does not show a profit motive.  If he also had another home, the definitely emphasizes that the housing value was not a motive for profit.

In my opinion, trying this hard to make it self employment just to qualify for for Social Security borders on Social Security Fraud.

[TomD8]

I think the word "fraud" is a little harsh.  Obviously the taxpayer is trying to do the right thing.  I'd suggest he email the IRS at <a rel="nofollow" target="_blank" href="mailto:irs.gov.website.helpdesk@speedymail.com">irs.gov.website.helpdesk@speedymail.com</a> and explain his situation, and ask if his barter income can be properly reported on Schedule C.

[RickInFlorida]

Bill, thanks for your input.  Yes, I said I "volunteered" to teach English, but I guess I used that semantic distinction only because the Spanish school calls us volunteers.  I could just as easily have said I "bartered" teaching English, because that's what I did.  I would not have done it if not for the room and board in a very nice hotel in a beautiful part of Spain. It was hard work tutoring for long days, sometimes into the evening, most days.  Staying there for free, and eating excellent food in a top notch restaurant for free, was the "profit" motive.  I exchanged a service in exchange for their accommodations.

In any case, I'm not so sure I would say that a profit motive is the test for whether volunteering is taxable.  From the IRS:  "...income or reimbursements you receive for volunteering — such as stipends, education awards, bonuses and allowances — may be considered taxable income..."
(<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-utl/oc_aug_volunteers_pay_taxes_072911_02.pdf">https://www.irs.gov/pub/i...

And the IRS says this about bartering:  "Bartering is the trading of one product or service for another. Usually there is no exchange of cash. The IRS reminds all taxpayers that the fair market value of property or services received through a barter is taxable..." income<a rel="nofollow" target="_blank" href="https://www.irs.gov/newsroom/four-things-you-should-know-if-you-barter">https://www.irs.gov/newsroom...> ."

But I think we're all trying to think this through as we go along, lacking iron-clad definitive information, so I thank you (and the others) for taking the time to contribute your viewpoint, Bill.  Maybe one day the IRS will simplify and then people like me can stop biting their nails over whether they're doing the right thing.

The last thing I want to do is run afoul of the IRS/SSA rules as I don't want to risk SS benefits being canceled after I start receiving them (thank you, TomD8).  I'm sure it's possible to carelessly overstate income to earn SS credits, or even purposely"defraud" the SSA.  That's ***exactly*** what I'm trying to avoid by gathering information on the various activities I mentioned in my original question that I *think* qualify as bartering, and doing some thorough tax planning.  Hence my question on this board.  

I've also talked to two tax accountants who couldn't give me definitive answers while saying basically, just do what you think is right and you'll find out if and when you ever get audited.  Needless to say, that's not good enough.

TomD8, I wasn't aware of that email address for the IRS (and I've done a lot of digging!).  I tried to call them a few weeks ago, but apparently they don't take phone calls any more.  I'll email them my questions now that I have that address and consider their answers along with those here.  Thanks.

[Hal_Al]

Your clarification makes things look better for your case. I first took “room & board” to mean you stayed in a school dormitory. It’s clearer now that you bartered your labor for a fancy European vacation. When you barter your labor, it is usually self employment income. The fancy “room and board” are also not necessarily expenses of the job, as I stated earlier. Although a case could be made for deducting some of it.
I also agree with your accountants: "just do what you think is right".

Please let us know if you get response from the IRS. I found this wording at <a rel="nofollow" target="_blank" href="https://www.irs.com/articles/contacting-the-irs">https://www.irs.com/articles/contacting-the-irs</a> : “When using the email address, keep in mind the IRS will not answer questions through that address. You must call the phone numbers above for personal tax questions. Do not include personal information in any emails.”