Schedule F
Schedule F is to be used only for farmers who are considered sole proprietors. Farmers who operate their farming business through a corporation or other business entity must report income and expenses on the appropriate business tax return.The key to preparing an accurate Schedule F is to keep excellent records of your income, crops, livestock, other assets, and various expenses. Farmers should use some type of accounting software, such as Quickbooks.
Farmers should use top of the line tax preparation software, such as TurboTax Premier or TaxAct Deluxe. That's because you will need to utilize many advanced features, such as entering assets, tracking depreciation, accurately calculating your net profit or loss, and averaging your farming income using Schedule J. These advanced calculations cannot be handled by lower-end tax software, so you'll want to pick a robust tax software program.
Essential Resources for Farmers
An excellent summary of tax information for farmers can be found in TheTaxBook Deluxe, Chapter 5, pages 5-26 through 5-30. TheTaxBook is a quick reference book designed for tax professionals, but farmers may find the information in TheTaxBook easier to follow.Purdue University professor George Patrick has published an excellent overview of tax planning strategies for farmers.
Farmers will also need to rely on the following IRS Publications:
- Tax Information for Farmers
- Instructions for Schedule F
- IRS Forms and Publications to Assist Farmers
- Farmer's Tax Guide (Publication 225)
- Schedule F, Profit or Loss from Farming (PDF)
- Schedule J, Farm Income Averaging (PDF)
- Instructions for Schedule J
