Taxpayers use Schedule F (Form 1040) to report income and expenses from farming activity as a self-employed farmer. Net profits are subject to Self-Employment Tax (Schedule SE).
For tax purposes, a farmer is defined as any individual who cultivates (plants, waters, gathers crop), operates, or manages a farm for profit. They can either own the farm land or lease it as a tenant. Included in a farm are livestock, dairy, poultry, fish, fruit, plantations, ranches, ranges, orchards, and nurseries. For a complete definition see Publication 225 - Farmer's Tax Guide.
Areas covered in detail:
Creating Schedule F
Entering Assets and Depreciation
Entering Car and Truck Expense
Entering Vehicle Actual Expense
Creating Schedule F
From the Main Menu of the tax return (Form 1040) select:
- Farm Income (Sch F) - Select New. If the prior year return includes Schedule F, click Prior to pull its data into the current year.
- For a new Schedule F:
- For a MFJ return indicate if it is for the taxpayer or spouse.
- From the list provided, select the Principal Business Activity code that best describes the farm.
- Enter the Employer ID number, if the farm has one.
- Review and answer the questions in the Schedule F - Questions Menu. The answers provided are the default answers for most situations, however any of them may need to be changed for this particular farm.
- For a Schedule F pulled forward from the prior year:
- Review items under the Schedule F - Questions Menu to verify they are still correct.
- Review the assets in the Depreciation Module. If any were disposed of, select the asset, and in the Depreciation Data Entry Screen select Disposition and enter the details requested.
Note: The inventory method for tracking the cost of livestock is only available if the farm is using the accrual method of accounting. If using the cash method of accounting, the cost will be tracked and reported to arrive at net sales of livestock.
- 1099-PATR Distributions - Enter each Form 1099-PATR received. See here for more information.
- Agricultural Program Payments are normally reported on Form 1099-G. This includes Coronavirus Food Assistance Program Payments, Market Facilitation Program Payments, etc.
- Commodity Credit Corporation Loans - Refer to CCC-1099-G for additional information
- Crop Insurance Proceeds - Report funds received due to loss of crop due to disaster as income.
Expenses incurred by the business can be entered by selecting Expenses from the Schedule F - Edit Menu. Enter expenses in the categories provided, and use Other Expenses for any expense that doesn't fit a category.
Select Depreciation to enter new assets to be depreciated or indicate the disposition of existing assets. For vehicles, the standard mileage is entered in the Car & Truck menu, and actual expenses are listed in the Depreciation Module under Listed Property.
Select the Qualified Business Income Deduction Amounts menu to include the amount of wages paid on W-2s and also to indicate if this is a Specified Service Business (SSB) as defined by the IRS. Refer to Publication 535, Business Expenses to determine if the farming business is a SSB as well as determine if the business activity generally qualifies for the QBID.
If there was a prior year un-allowed loss, enter the amount on the Schedule F - Questions menu. Only enter a prior year unallowed loss if the current year's activity is a net profit. If the current year's activity is a net loss, an amount entered here will cause an incorrect calculation.
Entering Assets and Depreciation
From the Schedule F - Edit Menu select:
- Depreciation Module
- If you have prior year data to pull forward, select Pull. Any data available to be pulled forward will display. Otherwise, select New.
- Input the requested information about the asset: a description of the asset (use details to help differentiate it from other similar assets in the depreciation schedule), the date placed in service, cost, and the percentage of business use. Enter both the federal and state Section 179 Deduction if the taxpayer is taking this deduction, any accumulated depreciation, and the depreciation method to use. If you are not sure what depreciation method is appropriate for a particular asset, refer to Publication 946.
- If the property has been disposed of, be sure to select Disposition, answer YES to being disposed of, enter the disposition date, and then indicate if you want the asset to be carried to Form 4797. If you are carrying the amount to Form 4797, enter the sales price and indicate which section of the form to carry the asset, either Part I, Part II, or Part III.
Entering Car & Truck Expenses
There are two methods that can be used to deduct vehicle expense, Standard Mileage and Actual Expenses. However, only one method may be used per vehicle, with some exceptions.
To enter the Standard Mileage, from the Schedule F - Edit Menu select:
- Car & Truck
- Car & Truck (Std Mileage Rate - Form 4562)
- Enter/Edit Vehicles
- Select New
- Enter the date the vehicle was placed in service along with the Business Miles, Commuting Miles, and Personal Miles driven.
Entering Vehicle Actual Expenses
To enter a vehicle in the Depreciation Module, from the Schedule F - Edit Menu select:
- Depreciation Module
- Select New. Select Pull if you prepared the return using the software in the previous year and wish to pull the data forward.
- In the Depreciation Entry screen, enter a description of the asset (use details to help differentiate from other vehicles in the Depreciation Schedule), date placed in service, cost, and the percentage of business use, the Section 179 Deduction if the taxpayer is taking this deduction, any accumulated depreciation, and the property class. Regarding the percentage of business use:
- If the percentage of business use is 100% and the vehicle is categorized under Listed Property, the commuting and personal mileage will be zero.
- If the percentage of business use is less than 100% and the vehicle is listed under Listed Property, then enter the business, commuting, and personal miles in the Listed Property menu, and the program will calculate the percentage of business use.
- If the percentage of business use is less than 100%, and the vehicle is not listed under Listed Property, then calculate the percentage of business use as follows:
Business Miles / (Business Miles + Personal Miles + Commuting Miles)
- If the asset fits the definition of Listed Property:
- Select Listed Property, and select YES to confirm
- Select the listed property category
- Enter the mileage in the three categories.
- Enter the actual expenses (items such as gas, oil, tires, repairs, etc.). Use F10 to detail the various expenses.
- If the property has been disposed of, be sure to select Disposition, answer YES to being disposed of, enter the disposition date, and then indicate if you want the disposition to be carried to Form 4797. If you are carrying the amount to Form 4797, enter the sales price and indicate which section of the form to carry the asset, either Part I, Part II, or Part III.
Note: This is a general guide to creating and editing Schedule F in the TaxSlayer Pro program. This is not intended as tax advice.
Instructions for Schedule F, Profit or Loss From Farming
Publication 225, Farmers Tax Guide
Publication 463, Travel, Entertainment, Gift, and Car Expenses
Publication 535, Business Expenses