As a tax professional, it’s crucial to have a clear understanding of the various forms that farm taxpayers use to report their farming income and expenses. The tax code provides specific guidelines and requirements for farmers to accurately report their financial activity related to their farming operations. Let’s take a closer look at the key forms that taxpayers typically use for farm tax reporting purposes. For a deeper dive into these and many other related issues, check out our self-study courses Deciphering IRS Pub. 225, Farmer’s Tax Guide: Part 1 and Part 2.
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Schedule F (Form 1040), Profit or Loss From Farming
Schedule F is the primary form used by farm taxpayers to report their farming income and expenses. It is attached to Form 1040. On Schedule F, farmers report their gross income from farming, including sales of crops, livestock, and other farm products. They also deduct their allowable farming expenses, such as costs for seeds, fertilizers, fuel, labor, repairs, and depreciation on farm equipment and buildings. Schedule F also includes sections for reporting other income, such as government payments, insurance proceeds, and income from cooperatives.
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Form 4835, Farm Rental Income and Expenses
Farm taxpayers who rent out farmland to others use Form 4835 to report their farm rental income and expenses. This form is used to report income received from cash rents, crop shares, and other forms of farm rental arrangements. Farmers report their gross rental income and deduct their allowable rental expenses, such as property taxes, mortgage interest, and repairs on the rented farmland. Form 4835 is attached to the farmer’s individual income tax return, typically Form 1040.
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Schedule E (Form 1040), Supplemental Income and Loss
Landowners or sub-lessors who receive cash rent for pasture or farmland based on a flat charge report their income on Schedule E. Likewise, any estates or trusts with rental income and expenses from crop and livestock shares report their income on Schedule E.
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Form 4562, Depreciation and Amortization
Farmers are allowed to depreciate their farm assets, such as equipment, buildings, and breeding livestock, over time to account for wear and tear or obsolescence. Form 4562 is used to report the depreciation and amortization expenses associated with these farm assets. Farmers need to provide detailed information about the assets, including their cost, date placed in service, and method of depreciation or amortization used.
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Form 1099-MISC, Miscellaneous Income
Farmers may receive payments for their farming activities that are not reported on Schedule F or Form 4835. These payments may include income from custom farming, contract work, or other miscellaneous farming activities. If the farmer receives payments of $600 or more for these activities, the payer is required to issue a Form 1099-MISC to the farmer, which must be reported as miscellaneous income on Schedule F or Form 4835, as applicable.
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Forms 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return and 943, Employer’s Annual Federal Tax Return for Agricultural Employees
Farmers who have employees and pay wages are required to withhold and pay certain payroll taxes, including Social Security and Medicare taxes, as well as federal and state income taxes on Forms 940 and/or 943.
In conclusion, farm taxpayers use several forms to accurately report their farming income and expenses. It’s essential for tax professionals to be familiar with these forms and the specific requirements for reporting farming income and expenses to ensure compliance with the tax code and minimize the risk of errors or audits.
By Kelly Golish, CPA
University of Illinois Tax School
Assistant Director, Tax Materials
Written in collaboration with ChatGPT
