Tax season can be daunting for farmers and ranchers. After a long day out in the field, filing taxes just doesn’t sound appealing. But if you’re equipped with knowledge, the tax filing process could be quicker and you might even save your operation some money. So, let’s dig in and see if a Schedule F form is right for you and how to file one.
The IRS form Schedule F is a form that any sole proprietorship / single-member LLC farming business must complete when filing your federal taxes.
It is titled as “profit or loss from farming,” and it does exactly that - it helps you report your profit and loss from farming when you file your income taxes. The information that you input into Schedule F funnels into Form 1040 to help assess your total income tax liability.
As a taxpayer, it can get confusing keeping all of the different tax forms straight, so here’s a quick guide:
To file a Schedule F form, you’ll need information about:
Tracking all of the above can be somewhat overwhelming, which is why we recommend a proactive budgeting and expense tracking approach. FarmRaise Tracks can help you stay up-to-date with your expense tracking, even while offline in the field. The app will export reports of your expenses for your tax preparer come tax time.
When you complete Schedule F, you’ll have the opportunity to deduct certain farm expenses from your overall tax burden. Most farm expenses are helpful in this deduction calculation - so you’ll want to keep good records so that you can maximize your refund.
For example, if you log your expenses throughout the year on conservation activities, you might be able to deduct these expenses from your overall tax liability. To do this, you will need to prove that your conservation projects were approved by the NRCS or a comparable state conservation agency.
Expenses that are considered depreciable (equipment) or that qualify as ordinary business expenses (seed, inputs, etc.) would not be considered conservation expenses, even if they were used for a conservation practice. Instead, to take advantage of the conservation deduction category, you’ll want to report the cost of constructing windbreaks, irrigation ditches or terraces, or the cost of eradicating brush.
For farmers who receive conservation cost-share from the USDA through EQIP or CSP, you’ll want to report this income in a really specific way so that you can get the biggest benefit.
You can be creative with how you deduct certain farm expenses. For car and truck expenses, you have the option to either report out your vehicle’s actual cost of use, or the standard mileage that you had throughout the year for business purposes. For the former method - actual cost of use - you’ll want to keep accurate records of costs like fuel, repairs, oil, licensing and depreciation. Don’t yet have a good system to keep these records? Check out Tracks which was designed exactly for that purpose!
Asset depreciation is also something to consider for tax deduction. And, for farmers who grow crops on trees and vines, you can deduct 100% of the cost of the plant in the first year that you plant it.
You can also deduct:
See more specifics about deductions here.
While you might be inclined to just throw all your receipts into a shoebox and forget about them until tax time, we recommend a more proactive and organized approach to tracking your expenses.
With FarmRaise Tracks - a mobile app for farmers - you can easily track your expenses in real-time so that you don’t have a headache later on. Tracks allows you to snap and upload pictures of receipts for every transaction, linking these to farm tax categories that you'll need for your Schedule F. In the app, you can track your farm expenses by farm product or crop, split expenses in seconds, and know your expenses for every major farm project.
Then, come tax time, you can export a csv report of all of your categorized expenses and send it straight to your tax preparer.
Typically, there are two opportunities to pay your taxes and file your Schedule F.
If you follow a normal calendar year schedule, the first opportunity is in mid-January. For 2023, this deadline was January 17, 2023. Alternatively, you can file your Schedule F alongside or Form 1040 by March 1, 2023, as long as you are able to pay the full tax amount due at that time.
If you don’t follow a typical calendar year for your business, then you will need to file your Schedule F and pay the associated taxes by:
The form must be submitted, with your payment, to the IRS by the above deadline.
While FarmRaise is dedicated to your farm’s financial health, it’s best to consult a CPA - certified public accountant - or financial professional when seeking financial or legal advice. The intention of this post is to offer you tips that could lead to farm prosperity but is not a substitute for professional advice.
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