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Swapping Services: 1099-NEC and Fair Market Value

October 17, 2026 · 2 min read

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Educational information only. Not tax, legal or financial advice. We are not the IRS and are not affiliated with it. Check IRS.gov and consider a qualified tax professional. Sources read October 17, 2026. Anything marked expected should be re-checked. Examples use made-up numbers. This page contains no affiliate links.

Short answer: The IRS instructions list "exchanges of services between individuals in the course of their trades or businesses" as reportable nonemployee compensation. In the IRS example, an attorney represents a painter for nonpayment of business debts in exchange for the painting of the attorney's law offices. Each reports on Form 1099-NEC the fair market value (FMV) of their own services performed, when the $2,000 threshold is met.

The exception inside the example

If the attorney instead represents the painter in a divorce, that is unrelated to the painter's trade or business. The attorney must report the value of their services, but the painter need not report the value of painting the law offices, because it is in exchange for legal services separate from the painter's business.

Taxable fringe benefits

The IRS also lists taxable fringe benefits for nonemployees, including personal use of company assets (for example business aircraft, yacht or auto) by a nonemployee or their guest. Valuation guidance is in Pub. 15-B.

Other reportable items on the same list (IRS)

Professional fees, fee-splitting or referral fees, payments for services including incidental parts or materials, and fees or travel reimbursements of at least $2,000 for which the nonemployee did not account to you.

Made-up example

A web designer builds a site worth $3,000 for an accountant, and the accountant prepares the designer's business books, worth $3,000. Following the IRS example, each side reports the FMV of their own services ($3,000) on Form 1099-NEC if the other is a business paying in the course of its trade and the threshold is met.

Related

What counts · Threshold

FAQ

How do I value my services?

The IRS says FMV; how to prove it isn't covered in the pages we read.

Do I need a W-9?

The usual TIN rules apply: see W-9.

What we could not verify

  • How to determine FMV for different kinds of services (not stated).
  • How goods-for-services swaps are treated (only service exchanges are in the instructions read).
  • Income tax treatment for the recipient (not covered; the IRS barter pages weren't read).
  • Pub. 15-B fringe-benefit valuation rules.

Sources