Farm Income - 1099PATR and Agricultural Program Payments

Form 1099-PATR is used by specified agricultural and horticultural cooperatives to report taxable distributions, including patronage dividends and other payments, to their patrons. This form is required when a cooperative pays at least $10 in patronage dividends or other distributions described in section 6044(b), or if federal income tax was withheld under backup withholding rules. The form includes specific boxes for various types of payments and deductions, particularly those related to the Section 199A deduction and qualified agricultural payments.

Key Boxes on Form 1099-PATR

• Box 1: Patronage Dividends – Reports the patron’s share of patronage dividends paid by the cooperative.
• Box 2: Nonpatronage Distributions – For farmers’ cooperatives exempt under section 521, this box reports distributions from nonpatronage sources, including cash, qualified written notices, and other property.
• Box 3: Per-Unit Retain Allocations – Reports allocations made on a per-unit basis, typically for cooperatives using a per-unit retain method.
• Box 4: Federal Income Tax Withheld – Reports any federal income tax withheld from the patron’s distribution.
• Box 5: Redeemed Nonqualified Notices – Reports redemptions of nonqualified written notices of allocation.
• Box 6: Section 199A(g) Deduction – For specified agricultural cooperatives, this box reports the patron’s share of the Section 199A(g) deduction passed through by the cooperative. The deduction cannot exceed 9% of the qualified payments in Box 7 and must be designated in a written notice sent to the patron during the payment period under section 1382(d). Only eligible taxpayers (excluding C corporations not themselves specified cooperatives) may claim this deduction.
• Box 7: Qualified Payments – Reports qualified payments made to the patron, which are defined under section 199A(b)(7). These payments are required to be reported regardless of whether any Section 199A(g) deduction is passed through.
• Box 8: Section 199A(a) Qualified Items – Reports qualified business income (QBI) items under Section 199A(a).
• Box 9: Section 199A(a) SSTB Items – Reports specified service trade or business (SSTB) items under Section 199A(a).
• Box 10: Investment Credit – Reports investment credit passed through to the patron.
• Box 11: Work Opportunity Credit – Reports work opportunity credit passed through.
• Box 12: Other Credits and Deductions – Reports other credits and deductions such as empowerment zone employment credit, low sulfur diesel fuel production credit, small employer health insurance premium credit, and others.
• Box 13: Specified Cooperatives – Check this box if reporting as a specified agricultural or horticultural cooperative, defined under section 199A(g)(4)(A), engaged in manufacturing, production, growth, extraction, or marketing of agricultural or horticultural products.

Eligibility and Exceptions

Cooperatives are generally not required to file Form 1099-PATR for payments made to corporations, tax-exempt organizations (including HSAs, Archer MSAs, and Coverdell ESAs), the United States, states, possessions, or the District of Columbia. Additionally, cooperatives primarily engaged in retail sales of goods or services for personal use may apply for exemption using Form 3491.

Tax Rule Reference

The reporting requirements for Form 1099-PATR are governed by section 6044(b) of the Internal Revenue Code. The Section 199A(g) deduction and qualified payments are defined under section 199A(b)(7) and section 199A(g)(4)(A), respectively. The allocation of deductions and credits must comply with section 1382(d) regarding written notices to patrons.

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Disclaimer: Always verify details with current Federal or State Department of Revenue Forms and Instructions. For complex tax situations, consult a CPA or tax attorney.