How to Report Income for Farming - Schedule F
Use Schedule F (Form 1040) to report income and expenses from farming activities. This form is filed with Form 1040, 1040-SR, 1040-SS, 1040-NR, 1041, or 1065. If you are engaged in farming, you may be subject to state and local taxes, business licenses, and fees. Always check with your state and local governments for additional requirements.
When to Use Schedule F
- Report farm income and expenses using Schedule F (Form 1040).
- File Schedule F with your federal tax return (Form 1040 or equivalent).
- Use Schedule F if you are involved in farming as a sole proprietor or individual.
Reporting Farm Income
Income from farming is reported in Part I of Schedule F. You can use either the cash or accrual method of accounting.
- Cash Method: Report income when it is actually or constructively received. This includes cash, checks, and fair market value of goods received.
- Accrual Method: Report income when it is earned or due, not when received. You must include animals and crops in inventory if using this method.
For income received from Forms 1099 or CCC-1099-G, determine if the amounts are part of farm income and report them on the appropriate line of Schedule F. For example:
- Form 1099-PATR → Line 3a
- Form 1099-A → Line 5b
- Form 1099-MISC for crop insurance → Line 6a
- Form 1099-G or CCC-1099-G for disaster payments → Line 6a
Special Reporting Situations
- Rents based on crop shares: If you materially participated in farm management, report these rents as income on line 2.
- Sales of livestock due to weather: You may elect to report income from livestock sales in the year after the sale if your main business is farming.
- Bartering income or illegal federal irrigation subsidies: Report these on line 8.
Additional Forms You May Need
- Schedule J (Form 1040): To figure tax by averaging farm income over the previous three years.
- Schedule SE (Form 1040): To pay self-employment tax on farm income.
- Form 172: To figure net operating loss (NOL).
- Form 461: To figure excess business loss.
- Form 4797: To report sales of farm property or livestock held for breeding, dairy, sport, or draft purposes.
Filing Requirements for Married Couples
If you are married and both spouses are involved in farming, you may elect to file separate Schedule F forms. Each spouse must report their share of income, deductions, and losses based on their respective interests in the farming venture. Each must also file a separate Schedule SE (Form 1040) for self-employment tax.
Reporting Net Profit or Loss
After calculating your net profit or loss, report it on:
- Line 34 of Schedule F (Form 1040)
- Schedule 1 (Form 1040), line 6
- Schedule SE (Form 1040), line 1a
Consider any excess business loss limitations. Refer to Form 461 and its instructions for details.
Helpful Resources
For more information and examples, refer to Publication 225 (Farmer’s Tax Guide). It includes important dates and guidance for farmers.
Source:
Schedule F (Form 1040) - Profit or Loss From Farming
Note: Always verify details with the official IRS forms and instructions or consult with a tax professional. OLT (Online Taxes) provides guidance based on current IRS rules but does not replace official tax advice.