Labor Rates Charged for Construction Services

**spldeals** · 03-16-2012, 04:37 PM

Hi,

My state is Seattle and I do massage services. I have exchanged massage services with construction services at my home. I bought all the material for construction services. Massage services and Construction services were worth $25,000 value. So, I added $25,000 as my income on return. But IRS sent me a letter that construction services I received were worth $40,000 and labor rates should be calculated at highest rate of Seattle. So, I have to include $15,000 more as gross income. Is it valid? As far as I know labor rates are calculated based on the rates on the day we get services. Pls advise.

**Bubba Jimmy** · 03-17-2012, 05:48 AM

Was this the result of an audit?

**spldeals** · 03-18-2012, 12:07 AM

Yes, it is the result of an audit.

**Bubba Jimmy** · 03-19-2012, 05:20 PM

How would the IRS know the value of construction services you provided? Did someone issue you a 1099 reporting $40,000? There is information you are not providing, because the IRS does not behave the way you are describing solely on the basis of an audit. In fact, if you reported $25,000 in income they would not even have any way of knowing this was barter compensation and not cash. So what's the rest of the story?