Preparing taxes for farmers involves its own set of challenges because they face tax rules that are different from most other businesses. You need to consider an array of unique tax issues related to farming, such as: government payment programs, farm property depreciation, crop insurance, prepaid farm expenses, commodity wages and farm income averaging.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.
Q: Are crop insurance proceeds taxable income?
A: Yes, crop insurance proceeds received by a farmer due to physical crop damage or reduction of crop revenue are considered taxable income.
Q: Are barns classified as 20-year property?
A: Yes, barns are farm buildings and have a 20-year recovery period.
Q: If farm workers are paid with crops, does the farmer need to recognize the value of the crops as income before taking a deduction?
A: Yes, the farmer must report the value of the crop as income on Schedule F (Form 1040), Profit or Loss From Farming, Line 2, as if the crop had been sold. The farmer can then deduct the crop’s value as a labor expense on Line 22.
Q: If farmers do not want to show income, can they still treat CCC loans as loan proceeds?
A: Yes, farmers are not required to treat CCC loan proceeds as income. By default, CCC loans are considered loan proceeds unless the farmer elects to treat them as income.
To learn more about preparing taxes for farmers, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.