Taxpayers earning income from their farming or fishing business may no longer need to make any estimated tax payments. In order to benefit from this, you have to file your tax return and pay your entire tax due on or before March 1 of the tax season before your tax obligations are due. This rule is only applicable for those who are farming and fishing income is at least two-thirds of the total gross income in either at the present or the following year. You can still file even if March 1 falls on a weekend or is declared a holiday because the next business day can be used to file the tax return and make your tax payments.
Farmers and fishermen who opted to file their returns on March 1, can make their single estimated tax payment on January 15 or the next business day only if January 15 falls on a weekend or if it’s declared a legal holiday. This is done to avoid estimated tax penalties. You may belong to those whose situation does not apply within these rules. If so, be sure to make quarterly estimated tax payments instead.
How to file for your farming income?
You will be asked to be the IRs to file your report of income and expenses from your farming operations using the Form 1040, under Schedule F, as well as include your profit or loss from farming in the report. On the other hand, those whose net earnings from farming starts from $400 or more, a self-employment tax has to be filed using the same Form 1040 but under Schedule SE. Your self-employment tax is calculated based on your net earnings.
How to file for your fishing income?
Whatever amount you receive from catching, taking, harvesting, cultivating or from fishing is called Gross income. Included in the sea creatures you fish are shellfish, crustacean, sponges, seaweeds, and other aquatic forms of animal or vegetable life. You can also include monies from patronage dividends as well as fuel tax credits and refunds. The amounts you received has to be seen under Schedule C using Form 1040, and your profit or loss from the business. However, it is important to note that the gains and losses coming from your income from fishing must be reported under Schedule D. It is therefore not considered as a gross income from fishing.
In order to find whether or not at least two-thirds of a fisher’s gross income is from fishing, you must write down the following amounts under fishing income:
What is income averaging for farmers and fishermen?
You may have heard of income averaging if you’re a farm or a fisherman. Income averaging is only applicable for those whose income from fishing and farming activities for the present year is significantly higher than that of their other sources of income over the past three years. The Internal Revenue Service released Schedule J form to give farmers and fishermen a chance to average their fishing and farming income and reap its benefits.
This is a great advantage to those who want to balance their current tax bracket with the bracket from the previous years in order to avoid being taxed at a much higher rate in the present year. The base years or the income from the past three years doesn’t always have to come from farming or fishing activities as well. To better understand whether you qualify for income averaging, consult your most trusted tax professional as soon as you get the chance. Consulting a tax professional will help do the calculations on your behalf, prepare and file your taxes. You will only have to answer the questions provided and whatever your answers are will be entered to the right tax forms.
