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Special Tax Considerations for Farmers and Fishermen

Special Tax Considerations for Farmers and Fishermen

Farming and fishing ventures are usually considered a form of self-employment. The difference is that they have special reporting requirements and may have different benefits or advantages available to them compared to other business types.

Farming and fishing income tax returns can be very complicated. You need a tax professional who can help you set up your bookkeeping and work with your taxes on regular basis in both of these professions. The Goldberg Tax Practice can help farmers and fishermen do their taxes correctly and take advantage of the many special benefits that these professions have.

Farming Taxes: Schedule F

Every farm will have to fill out a Schedule F to report their income and expenses related to their farming business. This form is much like a regular business’s Schedule C, except that there are specific expense categories that apply to farmers. Regardless of whether the farming operation is an individual venture, operated through a trust, partnership, or corporation, profit or loss from farming must be reported on a Schedule F.

Schedule F also applies to those who are renting or leasing the land instead of owning it directly. If you earn your income from farming, you must file a Schedule F. This includes those who operate farms that produce:

·         Dairy

·         Poultry

·         Fruit

·         Crops of any kind

·         Animals for slaughter

It also applies to those operating stockyards, nurseries, ranges, ranches, orchards, and groves. If you materially participated in producing a crop, then you may also have to file a Schedule F if you sold crop shares.

Schedule F specifically addresses income and losses related to:

·         Land

·         Depreciable farm equipment

·         Depreciable buildings and other structures

·         Livestock held for breeding, sport, dairy, or draft purposes

Often, farming income is expressed as the difference between the cost of producing the crop or animal and how much the product can sell for. This is virtually the same concept as any other type of business—profit is the difference between the cost of producing a product and the sale price.

In farming, however, there are a range of special tax considerations that must be addressed on your tax return. Part of the reason that farming tax returns are so unique is because of the many federal and state benefits that farmers can use. Examples include:

·         Sales caused by poor weather conditions

·         Special treatment for crop shares

·         Special federal and state payments for farmers (Agricultural Program Payments)

·         Crop insurance payouts or crop disaster payments

·         Commodity Credit Corporation Loans

·         Conservation Reserve Program payments

·         Cost-sharing exclusions from federal and state programs

·         Feed assistance and associated payments

·         Income from cooperatives

·         Cancellation of debt issues

·         Bankruptcy and insolvency problems

Fishing Taxes

Unlike farmers, fishermen can file a regular Schedule C to report their income and losses from their fishing business. If you have income from catching, harvesting, cultivating, or farming fish, then you are considered a fisherman for tax purposes. It also applies to those who engage in activities that involve:

·         Shellfish

·         Seaweed

·         Sponges

·         Crustaceans

·         Other aquatic forms of animal or vegetable life

Of course, this does not include those who are employed by a fisherman. Only those who actually engage in their own fishing business need to worry about reporting income to the IRS as a fisherman.

At least two-thirds of your yearly income should come from fishing activities to report as a fisherman on your taxes. This includes time spent working on a fishing vessel as an officer or crew member, you share of an S corporation or partnership that engages in fishing, and other income from services normally performed in connection with fishing.

Unlike farming, the sale of fishing assets is reported on Schedule D (farming sale of assets is reported on Schedule F as well). That means that selling fishing assets will not affect your gross income or loss from fishing activities.

Fishermen can also take advantage of certain deductions that other tax payers may not be able to, including:

·         Meal deductions when you are away from home on business at least over night

·         Health insurance deductions when you must pay for your own health insurance

·         Losses associated with bankrupt fish buyers

·         Fishing fuel tax credit

·         Deprecation for fishing assets

·         Disposing of fishing permits or licenses

Getting Professional Help for Your Farming or Fishing Taxes

Farming and fishing income taxes are complicated. Finding all of your available credits and deductions is a daunting task. Let the tax professionals at The Goldberg Tax Practice handle these complex task issues for you and your business. Click on our profile below to find out more or click the Contact button to get started.

 

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