2012 Federal Tax Forms Used by Beginning Farmers and Ranchers

J C Hobbs, Assistant Extension Specialist Department of Agriculture Economics, Oklahoma State University

Introduction

This article provides a list of business and personal tax forms and schedules which farmers and ranchers may experience when filing their annual income tax return. This publication does NOT cover the rules that apply for each of these forms. For a more complete list of forms and publications visit the IRS Forms and Publications website at: www.irs.gov for the most current forms and publications.

Group 1: The Most Common Federal Business and Personal Tax
Forms and Schedules Used by Farmers and Ranchers

Form 1040—U.S. Individual Income Tax Return 

Annual individual income tax return filed by citizens or residents of the United States. You must
use Form 1040 instead of either Form 1040EZ or the 1040A (discussed later in this material)
should any of the following apply:

1. Your taxable income is $100,000 or more
2. You claim itemized deductions
3. You are reporting self-employment income from a trade or business
4. You are reporting income from sale of property

Most farmers are required to report self-employment income from an active trade or business, so
they file Form 1040.

Schedule A—Itemized Deductions

Schedule A (Form 1040) is used to figure your itemized deductions from your personal expenses, not business expenses. Itemizing allows you to deduct a part of your medical and dental expenses and unreimbursed employee business expenses, and amounts you paid for certain taxes, interest, contributions, and miscellaneous expenses. You can also deduct certain casualty and theft losses.

Some famers file Schedule A and some do not, depending upon their personal situation. Business expenses are deducted on Schedule F, Form 4797, Form 4684, and other business related forms.

Schedule B—Interest and Ordinary Dividends 

Use Schedule B (Form 1040) if any of the following apply:

1. You had over $1,500 of taxable interest or ordinary dividends
2. You received interest from a seller-financed mortgage and the buyer used the property as a personal residence
3. You have accrued interest from a bond
4. You are reporting original issue discount (OID) in an amount less than the amount shown on Form 1099-OID
5. You are reducing your interest income on a bond by the amount of amortizable bond premium
6. You are claiming the exclusion of interest from series EE or I U.S. savings bonds issued after 1989
7. You received interest or ordinary dividends as a nominee
8. You had a financial interest in, or signature authority over, a financial account in a foreign country or you received a distribution from, were a grantor of, or transferor to, a foreign trust

Part III of the schedule has questions about foreign accounts and trusts.

Some farmers will file Schedule B and some do not, depending on their personal situation

Schedule D—Capital Gains and Losses 

File Schedule D (Form 1040) to report the following:

1. The sale or exchange of a capital asset not reported on another form or schedule
2. Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit
3. Capital gain distributions not reported directly on Form 1040 (or effectively connected capital gain distributions not reported directly on Form 1040NR)
4. Nonbusiness bad debts

Schedule E—Supplemental Income and Loss 

Part I of Schedule E (Form 1040) is used to report income or loss from rental real estate (cash farm rent) and royalties. Part II is used to report income or loss from partnerships and S corporations. Part III is used for estates and trusts, while Part IV is used for reporting income and loss from residual interests in Real Estate Mortgage Investment Conduits.

Some farmers file Schedule E and some do not, depending on their personal situation.

Schedule F—Profit or Loss from Farming

Schedule F (Form 1040) reports your farm income and expenses. Cash method taxpayers will use Parts I and II to report their farm business income and expenses. Accrual taxpayers will primarily use Parts II and III.

Most all farmers will file Schedule F.

Schedule J—Income Averaging for Farmers and Fishermen

Schedule J (Form 1040) is needed when electing to figure your income tax using the income averaging rules. This election may result in less tax if your income from the trade or business of farming or fishing in the last year is high and your taxable income for one or more of the 3 prior years was low.

Some farmers use Schedule J in certain high income years. Schedule J is a very useful tool for farmers to minimize taxes and income averaging can used by farmers for an unlimited number of years.

Schedule SE—Self-Employment Tax (Short and Long Schedules) 

Schedule SE (Form 1040) is used to determine the tax due on net earnings from selfemployment. The Social Security Administration uses the information from Schedule SE to figure your benefits under the social security program. This tax applies no matter how old you are and even if you are already getting social security and/or Medicare benefits.

Nearly all farmers file Schedule SE. Farmers should consider using the “optional method” for paying self-employment taxes during low gross/net income years to gain/maintain coverage

Form 943—Employer’s Annual Tax Return for Agricultural Employees

Agricultural employers use Form 943 to report income tax withheld and social security and Medicare taxes on wages paid to farmworkers, including household employees working in a private home on a for-profit farm.

Farmers with employees must file Form 943 to report the withholding.

Form 1096—Annual Summary and Transmittal of U.S. Information Returns

This form is used to transmit the paper versions of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G to the Internal Revenue Service.

Form 1099—Information Returns to Be Filed by Person Who Makes Certain Payments

The filing of Form 1099-A, Acquisition or Abandonment of Secured Property, is required if you lend money in connection with your trade or business and you acquire a full or partial interest in the property that is security for the debt. You need not be in the business of lending money to be subject to this reporting requirement. If you are required to file Form 1099-A, you must provide an explanatory statement of interest and principal to the borrower and a copy of Form 1099-A or an acceptable substitute statement.

File Form 1099-MISC for each person to whom you have paid during the year if any of the following apply:

1. Paid $10 or more in royalties
2. Paid $600 or more to a non-employee (who is un-incorporated) for services (including parts and materials)
3. Paid $600 or more to an attorney

Farmers file Form 1099 if their situations match the reporting requirements.

Form W-2—Wage and Tax Statement 

Every employer engaged in a trade or business who makes a payment for services performed by an employee, including noncash payments, must file a Form W-2 for each employee including spouse or child from whom:

1. Income, social security, or Medicare tax was withheld
2. Income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4, Employee's Withholding Allowance Certificate.

Farmers who have employees generally must file Form W-2.

Form W-3—Transmittal of Withholding Statements

Anyone required to file Form W-2 “Wage and Tax Statement” must file Form W-3 to transmit Copy A of Forms W-2.

Form 3800—General Business Credit

Form 3800 is used to claim any of the 32 general business tax credits. There are several credits that apply to agriculture and therefore must be considered. (Refer to the instructions for this form to learn more about the credits that you may qualify to use.)

Farmers who meet the special conditions file Form 3800 to obtain the benefits of the applicable general business tax credits.

Form 4136—Credit for Federal Tax on Fuels

Form 4136 is needed for a farmer to claim a credit for certain nontaxable uses, such as fuel used on the farm for farming during the tax year. Also use Form 4136 if you are claiming the alternative fuel credit.

Many farmers file Form 4136 to obtain this credit.

Form 4562—Depreciation and Amortization (Including Information on Listed Property)

Use Form 4562 to:

1. Claim your deduction for depreciation and amortization used in the trade or business
2. Make the election under IRS Code Section 179 to expense certain property
3. Provide information on the business and or investment use of automobiles and other listed property.

Most farmers file Form 4562 to report their allowed depreciation expense.

Form 4684—Casualties and Thefts

Form 4684 is used to report gains and losses from casualties such as losses of property from fire, storm, shipwreck, or other casualty, or theft. If the property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss to deduct any part of the loss on your tax return.

Farmers who suffer these losses will need to file Form 4684.

Form 4797—Sales of Business Property

Form 4797 is needed to report the sale or exchange of property used in your trade or business and of oil, gas, geothermal, or other mineral properties. In addition report the involuntary conversion (from other than casualty or theft) of property used in or held in connection with your trade or business. Also report the sale or disposition of noncapital assets and capital assets not reported on Schedule D.

Many farmers file Form 4797 because of selling or trading farm business assets.

Form 4835—Farm Rental Income and Expense (Crop and Livestock Shares (Not Cash Payments) Received by a Landowner (or Sub-Lessor))

If you were the landowner (or sub-lessor) and did not materially participate in the business (for self-employment tax purposes) in the operation or management of the farm, use Form 4835 to report your share of farm rental income and expenses based on crops or livestock produced by the tenant.

Farmers who rent their farm using a share arrangement must file Form 4835.

Form 4868—Application for Automatic Extension of Time to File U.S. Individual
Income Tax Return

Form 4868 is used to apply for a filing extension of 6 more months (4 if “out of the country” and a U.S. citizen or resident) to file Form 1040, 1040A, 1040EZ, 1040NR, 1040NR-EZ, 1040-PR, or 1040-SS.

Farmers who need an extension of time to file their tax return must file Form 4868.

Form 5884—Work Opportunity Credit

Form 5884 is required to claim the work opportunity credit for qualified first-year or second-year wages you paid or owed to targeted group employees during the tax year. Your business does not have to be located in an empowerment zone, renewal community, or rural renewal county to qualify for the credit. In addition you can claim or elect not to claim the work opportunity credit any time within 3 years from the due date of your return on either your original return or an amended return.

Farmers who meet these required conditions must file Form 5884 to claim the credit

Form 5884-B—New Hire Retention Credit

Form 5884-B is needed to determine your new hire retention credit for retained workers. A credit of up to $1,000 is allowed for each retained worker if certain conditions are met.

Farmers who meet the requirements must file Form 5884 to get the credit.

Form 8824—Like-Kind Exchanges

Use Parts I, II, and III of Form 8824 to report each exchange of business or investment property for property of a like kind. Certain members of the executive branch of the Federal Government and judicial officers of the Federal Government use Part IV to elect to defer gain on conflict-ofinterest sales.

Farmers who use this type of exchange must file Form 8824.

Form 8829—Expenses for Business Use of Your Home

Should you have expenses for using your home for business purposes, use Form 8829 to figure the allowable expenses for the business use of your home on Schedule C (Form 1040) and any carryover to the next taxable year of amounts not deductible in the current tax year.

Farmers who meet the conditions and claim business use of home expenses must file Form 8829.

Form 8903—Domestic Production Activities Deduction

Form 8903 is used to figure your domestic production activities deduction (DPAD). Your DPAD is generally 9% of the smaller of:

1. Your qualified production activities income (QPAI)
2. Your adjusted gross income figured without the DPAD. However, your DPAD generally cannot be more than 50% of the Form W-2 wages you paid to your employees.

Many farmers will file Form 8903 because they sell their farm production through a cooperative and the cooperative passes the deduction to the farmer by reporting the information on a Form 1099-PATR to the farmer member.

Group 2: Other Common Federal Business and Personal Tax Forms and Schedules Often Used by Farmers and Ranchers

1040A—U.S. Individual Income Tax Return (Short Form)

You may be able to file Form 1040A if the following general situations apply. Refer to the instructions for Form 1040A for a more complete list of the requirements to determine if you can qualify. You may use the 1040A if:

1. Your taxable income is below $100,000
2. You have capital gain distributions
3. You claim certain tax credits
4. You claim adjustments to income for IRA contributions and student loan interest
5. You do not itemize deductions

Only a few farmers file Form 1040A.

1040EZ—Income Tax Return for Single and Joint Filers with No Dependents

You may be able to file Form 1040EZ if the following apply:

1. Your taxable income is below $100,000
2. Your filing status is Single or Married Filing Jointly
3. You and your spouse – if married -- are under age 65 and not blind
4. You are not claiming any dependents
5. Your interest income is $1,500 or less

Even fewer farmers file Form 1040EZ compared to 1040A.

Form 1040X—Amended U.S. Individual Income Tax Return

Use Form 1040X to do the following:

1. Correct Forms 1040, 1040A, 1040EZ, 1040NR, or 1040NR-EZ
2. Make certain elections after the prescribed deadline
3. Change amounts previously adjusted by the IRS
4. Make a claim for a carryback due to a loss or unused credit

File a separate Form 1040X for each year you are amending. If you are changing your federal return, you also may need to change your state return.

Schedule C—Profit or Loss from Business

Schedule C (Form 1040) is used to report income or loss from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business. A “hobby” is defined in IRS Publication 225.

Farmers who have a processing or agri-tourism enterprise on their farm should file Schedule C to report this income and expense.

Schedule C-EZ (Form 1040), Net Profit From Business

You can use Schedule C-EZ instead of Schedule C if you operated a business or practiced a profession as a sole proprietorship or qualified joint venture, or you were a statutory employee and you have met all the requirements listed in Schedule C-EZ, Part I.

You may use Schedule C-EZ instead of Schedule C only if you:

1. Had business expenses of $5,000 or less
2. Use the cash method of accounting
3. Did not have an inventory at any time during the year
4. Did not have a net loss from your business
5. Had only one business as either a sole proprietor, qualified joint venture, or statutory employee
6. Did not receive any credit card or similar payments that included amounts that are not includible in your income (see instructions for line 1a).

And you:

1. Had no employees during the year
2. Are not required to file Form 4562, Depreciation and Amortization, for this business.
3. See the instructions for Schedule C, line 13, to find out if you must file Form 4562
4. Do not deduct expenses for business use of your home
5. Do not have prior year unallowed passive activity losses from this business.

Form W-9—Request for Taxpayer Identification Number and Certification

A person who is required to file an information return with the IRS must obtain a correct taxpayer identification number (TIN) to report, for example, income paid, real estate transactions, mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, or contributions made to an IRA.

Use Form W-9 only if you are a U.S. person (including a resident alien), to provide your correct TIN to the person requesting it (the requester) and, when applicable, to:

1. Certify that the TIN you are giving is correct (or you are waiting for a number to be issued)
2. Certify that you are not subject to backup withholding
3. Claim exemption from backup withholding if you are a U.S. exempt payee.

Form 1065—U.S. Return of Partnership Income

Form 1065 is an information return used to report the income, gains, losses, deductions, credits, etc., from the operation of a partnership. A partnership does not pay tax on its income but “passes through” any profits or losses to its partners. Partners must include partnership items on their tax or information returns.

Farmers who are members of a partnership must file Form 1065.

Form 1099—Information Returns to Be Provided to a Person Who Receives Certain Payments

Form 1099-G, Certain Government Payments. Farmers may receive Form 1099-G, Certain Government Payments, if they get a state or local income tax refunds, a taxable grant, or agricultural program payments.

Form 1099-K, Merchant Card and Third Party Network Payments. You may receive Form 1099-K, Merchant Card and Third Party Network Payments, if you receive a payment from the sale of crops or livestock and the buyer uses a payment card to pay you.

Form 1099-PATR, Taxable Distributions Received From Cooperatives. If you a member of a cooperative and you are paid at least $10 in patronage dividends and other distributions, you will receive a Form 1099-PATR, Taxable Distributions Received From Cooperatives.

Form 1120—U.S. Corporation Income Tax Return

Form 1120, U.S. Corporation Income Tax Return, is used to report the income, gains, losses, deductions, credits, and to figure the income tax liability of a corporation.

If the farm business organization is a ‘C’ corporation, Form 1120 must be filed.

Form 1120S—U.S. Income Tax Return for an S Corporation

Form 1120S, U.S. Income Tax Return for an S Corporation, is used to report the income, gains, losses, deductions, credits, etc., of a domestic corporation or other entity for any tax year covered by an election to be an S corporation.

If the farm business organization is an ‘S’ corporation, Form 1120S must be filed.

Form 2106—Employee Business Expenses

File Form 2106 if you were an employee deducting ordinary and necessary expenses for your job. An ordinary expense is one that is common and accepted in your field of trade, business, or profession. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be required to be considered necessary.

While some wage earners (W-2) may find this helpful, few farmers will file this form.

Form 3115—Application for Change in Accounting Method

This form is used to request a change in either an overall method of accounting or the accounting treatment of any item. A change in depreciation method is an example of when to use this form.

Form 6251—Alternative Minimum Tax—Individuals

Form 6251 is used to determine the amount, if any, of your alternative minimum tax (AMT) liability. The AMT applies to taxpayers who have certain types of income that receive favorable treatment, or who qualify for certain deductions, under the tax law. These tax benefits can significantly reduce the regular tax of some taxpayers with higher economic incomes. The AMT sets a limit on the amount these benefits can be used to reduce total tax.

Some farmers may have to file Form 6251.

Form 6252—Installment Sale Income

Generally, use Form 6252 to report income from casual sales during this tax year of real or personal property (other than inventory) if you will receive any payments in a tax year after the year of sale.

Some farmers may have to file Form 6252.

Form 7004—Application for Automatic Extension of Time to File Certain Business
Income Tax, Information, and Other Returns

This form is used to request an automatic extension of time to file certain business income tax, information, and other returns.

Form 8582—Passive Activity Loss Limitations

Form 8582 is used by noncorporate taxpayers to figure the amount of any passive activity loss (PAL) for the current tax year

Form 8582 CR—Passive Activity Credit Limitations

Form 8582-CR is used by noncorporate taxpayers to figure the amount of any passive activity credit (PAC) for the current tax year (including any prior year unallowed credits) and the amount of credit allowed for the current year. It also is used to make the election to increase the basis of credit property when a taxpayer disposes of his or her interest in an activity.

Group 3: Other Common Federal Business and Personal Tax Forms and Schedules that Could be Used by Farmers and Ranchers

Schedule EIC—Earned Income Credit

Schedule EIC (Form 1040A or 1040) is needed to provide the IRS with information about your qualifying child or children in order for you to claim the Earned Income Credit should you qualify.

Some farmers file Schedule EIC, especially in low-profit years, while children are still dependents. However, the Schedule EIC is not a business form but instead relates to the personal/family situation.

Schedule H—Household Employment Taxes

File Schedule H to report household employment taxes if you pay any of the following wages to the employees:

1. Social security and Medicare wages of $1,800 or more
2. Federal Unemployment Tax Act (FUTA) wages
3. Wages from which you withhold federal income tax.

Schedule R—Credit for the Elderly or the Disabled

Schedule R (Form 1040A or 1040) is needed to calculate the credit for the elderly or the disabled. You must meet either the age or disability requirements to qualify.

Form 2441—Child and Dependent Care Expenses

If you paid someone to care for your child who is under the age of 13 or other qualifying person so you (and your spouse if filing jointly) could work or look for work, you may be able to take the credit for child and dependent care expenses.

Form 5329—Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts

Use Form 5329 to report additional taxes on IRAs, other qualified retirement plans, modified endowment contracts, Coverdell ESAs, QTPs, Archer MSAs, or HSAs.

Form 8606—Nondeductible IRAs

Use Form 8606 to report:

1. Nondeductible contributions you made to traditional IRAs
2. Distributions from traditional, SEP, or SIMPLE IRAs, if you have ever made nondeductible contributions to traditional IRAs
3. Distributions from Roth IRAs
4. Conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs
5. Certain distributions from designated Roth accounts allocable to in-plan Roth rollovers.

Form 8615—Tax for Certain Children Who Have Investment Income of More Than
$1,900 

For children under age 18 and certain older children, investment income over $1,900 is taxed at the parent's rate if the parent's rate is higher than the child's. If the child's investment income is more than $1,900, use Form 8615 to figure the child's tax. Investment income includes all taxable income other than earned income. Investment income includes taxable interest, ordinary dividends, capital gains (including capital gain distributions), rents, royalties, etc. It also includes taxable social security benefits, pension and annuity income, and income (other than earned income) received as the beneficiary of a trust.

Form 8801—Credit for Prior-Year Minimum Tax—Individuals, Estates, and Trusts

Use Form 8801 if you are an individual, estate, or trust:

1. To figure the current year nonrefundable credit, if any, for alternative minimum tax (AMT) you incurred in prior tax years
2. To figure the current year refundable credit (individuals only), if any, for any unused credit carryforward
3. To figure any credit carryforward.

Form 8812—Additional Child Tax Credit

Form 8812 is used to calculate the additional child tax credit. This additional child tax credit may give you a refund even if you do not owe any tax.

Individuals who meet these certain conditions must file Form 8812

Form 8814—Parents’ Election to Report Child’s Interest and Dividends

File Form 8814 if you elect to report your child’s income on your income tax return. If you file Form 8814 your child will not have to file a return. You can make this election if your child meets all of the following conditions

1. The child was under age 19 (or under age 24 if a full-time student) at the end of the year
2. The child’s only income was from interest and dividends, including capital gain distributions and Alaska Permanent Fund dividends
3. The child’s gross income for the year was less than $9,500
4. The child is required to file a return
5. The child does not file a joint return
6. There were no estimated tax payments for the child for the year
7. There was no federal income tax withheld from the child’s income.

Form 8834—Qualified Plug-in Electric and Electric Vehicle Credit

Use Form 8834 to claim the qualified plug-in electric vehicle credit and any qualified electric vehicle passive activity credits allowed for the current tax year.

Form 8853—Archer MSAs and Long-Term Care Insurance Contracts

File Form 8853 to:

1. Report Archer MSA contributions (including employer contributions)
2. Figure your Archer MSA deduction
3. Report distributions from Archer MSAs or Medicare Advantage MSAs
4. Report taxable payments from long-term care (LTC) insurance contracts
5. Report taxable accelerated death benefits from a life insurance policy.

If a farmer has these insurance products, they must file Form 8853.

Form 8863—Education Credits (Hope and Lifetime Learning Credits)

Form 8863 is used to calculate and claim your education credits, which are based on qualified education expenses paid to an eligible postsecondary educational institution. There are two education credits.

1. The American opportunity credit, part of which may be refundable credit
2. The lifetime learning credit, which is a nonrefundable credit

A refundable credit can give you a refund for any part of the credit that is more than your total tax. A nonrefundable credit can reduce your tax, but any excess is not refunded to you. Both of these credits have different rules that can affect your eligibility to claim a specific credit.

Form 8880—Credit for Qualified Retirement Savings Contributions

Use Form 8880 to determine if you qualify for the retirement savings contributions credit also known as the saver’s credit.

Form 8888—Direct Deposit of Refund to More Than One Account

File Form 8888 if you want to directly deposit your refund (or part of it) to one or more accounts at a bank or other financial institution (such as a mutual fund, brokerage firm, or credit union) in the United States, or you want to use your refund to buy up to $5,000 in paper series I savings bonds.

Form 8889—Health Savings Accounts (HSAs)

Form 8889 is required to:

1. Report health savings account (HSA) contributions (including those made on your behalf and employer contributions)
2. Figure your HSA deduction
3. Report distributions from HSAs
4. Figure amounts you must include in income and additional tax you may owe if you fail to be an eligible individual.

If a farmer has a Health Savings Account, then Form 8889 must be filed.

Form 8910—Alternative Motor Vehicle Credit

Use Form 8910 to figure your credit for alternative motor vehicles you placed in service during your tax year. The credit attributable to depreciable property (vehicles used for business or investment purposes) is treated as a general business credit. Any credit not attributable to depreciable property is treated as a personal credit.

Conclusion

Some of these forms and schedules relate to the business and others relate to the taxpayer outside of the business. For example, while many wage earners, as well as farmers, may file a Child Tax Credit, Earned Income Credit, Health Savings Account, Education Credit, Alternative Minimum Tax, and other forms, they need not necessarily be a farmer to do so. In other words, any taxpayer who meets the requirements to file for the Child Tax Credit may and should do so.

Note that this is not a complete list of all the forms and schedules that a farm or ranch taxpayer may need to use. This list is intended to provide a starting point to begin understanding the important forms and schedules while learning where various income, expenses, and credits are to be reported.

IRS Publications

For more information on or to access Schedule E, Schedule F, Form 1065, or Form 4835, visit the IRS website at www.irs.gov and click on “Forms and Publications.” Then click on “Publication number” under “Download forms and publications by.” Type the publication number in the find box to search for the publication. Publications may be viewed online or downloaded by double clicking on the publication.

Additional Topics

This fact sheet was written as part of Rural Tax Education, a national effort including Cooperative Extension programs at participating land-grant universities to provide income tax education materials to farmers, ranchers, and other agricultural producers. For a list of universities involved, other fact sheets and additional information related to agricultural income tax please see RuralTax.org.

Published August 2012

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