If you are a farmer and your farming business is a sole proprietorship, you must file Schedule F to report your business’s net profit or loss for the tax year. Livestock, dairy, poultry, fish and fruit farmers as well as owner/operators of plantations, ranches, ranges, nurseries or orchards are considered farmers for the purposes of Schedule F. Your farming profit or loss is transferred to form 1040 for computing your total tax liability. Schedule F is to farmers what Schedule C is to other sole proprietors.
Schedule F asks about your principal farming activity or crop; your income from selling livestock, produce, grains or other products; and whether you received farm income from cooperative distributions, agricultural program payments, Commodity Credit Corporation loans, crop insurance proceeds, federal crop disaster payments or any other sources. Schedule F provides different ways to account for your income depending on whether you use the cash or accrual method. You’ll also need to fill out Schedule F to claim tax deductions for your farming business, which will lower your tax bill. Deductions you may be able to claim include but are not limited to the expenses you paid for a business vehicle, chemicals, conservation, custom hire, depreciation, employee benefits, feed, fertilizers, freight and trucking, gasoline and other fuel, insurance, interest, hired labor, pension and profit-sharing plans, repairs and maintenance, seeds and plants, storage and warehousing, supplies, taxes, utilities, veterinary fees and rent or lease fees for vehicles, machinery, equipment, land and the like.
Schedule F also asks if you made any payments during the tax year that required you to file form 1099 and if you have filed it. An example of a case where you would need to file a 1099 is if you hired an independent contractor to perform more than $600 worth of work, such as transporting your produce to a weekly farmer’s market, for your farm business.