Author: Melissa Matthewson
Publish Date: Winter 2010
There are a number of intricacies associated with the Schedule F and your best resource guide for this is IRS Publication 225: A Farmer’s Tax Guide. Generally, you are required to report income from sales of any of your farm’s products. As well, there are some other things to keep in mind about reporting farm income. You may be able to delay reporting a gain from selling off animals or other products because of weather-related problems until the next tax year if you qualify. You also typically have to report income from agricultural payments for conservation programs or direct payments like crop insurance or disaster related farming payments except for cost-share programs. For instance, if you have received payment and reimbursement for organic certification from the government in 2009, you will need to report this income on your Schedule F. If you receive payments from a cooperative, you may need to report that income as well. Again, a great resource is the Farmer’s Tax Guide and a local accountant!
If you work with an accountant, they can help you fill out your Schedule F for the year, but some farmers also do their own taxes by using tax software like Intuit’s Turbo Tax®, which leads you systematically through filling out the proper tax forms for your farm business. The tax forms are then stored for future use once you submit, so that you can refer back to them and easily access them for loan applications or other uses. Recordkeeping throughout the year is extremely important as you can save a lot of time if you have adequately tracked expenses and income through a bookkeeping program. We’ve all heard of the farmer stashing receipts in a shoe box and when tax time comes around, that same farmer must spend hours sorting through receipts to understand how much the farm spent in one year and how much it made. But, staying organized and keeping better records can avoid this struggle. As well, keeping accurate and organized records has more benefits: moderating your farm’s progress as a business, helping you with banks and creditors by keeping more accurate financial statements, helping you to organize expense receipts, and finally, tax preparation and documentation is easier if you have kept good records.
Finally, find yourself a tax advisor or accountant that can help you sort through your questions. Setting up organized systems for recordkeeping to track income and expenses will help make your tax work easier each year.