Tax time is a busy time of year for business owners, and this includes farmers and ranchers. Navigating filing your taxes can be challenging, especially if you are new to running a farm business, participated in disaster programs for first time, or are trying to forecast your farm’s tax bill. Receiving funds from USDA through activities such as a conservation program payment or a disaster program is considered farm income that includes a tax liability for farm businesses.
To better support America’s farmers and ranchers USDA has partnered with tax experts from across the country to connect producers to information and resources related to USDA program payments, asset protection, and the important relationships between federal income taxes and USDA farm programs.
Tax Resources for IRA Assistance Recipients: Section 22006 of the Inflation Reduction Act (IRA) provided $3.1 billion for USDA to provide relief to distressed borrowers with certain FSA loans and to expedite assistance for those whose agricultural operations are at financial risk.
Which Programs Create Taxable Payments?
USDA issues 1099 forms for:
- Conservation programs administered by the Farm Service Agency and Natural Resource Conservation Service (such as the Conservation Reserve Program and Environmental Quality Incentives Program)
- Crop disaster payments
- Assistance for distressed borrowers, including through Section 22006 of the Inflation Reduction Act
- Market Facilitation Program
Additionally, USDA issues 1098 forms for USDA farm loans, if:
- The farmer is classified as an individual.
- And if the farm ownership or operating loan is secured by real estate.
USDA technical assistance is free and creates no tax implications.
Tax Resources for Recipients of Inflation Reduction Act Assistance
On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) into law. USDA has allocated up to $1.3 billion for initial steps to help distressed borrowers. This includes both automatic and case-by-case assistance. Recipients of this initial assistance received an Internal Revenue Service Tax Form 1099-G from FSA if they received payments of $600 or more, which are subject to Federal and State Income Taxes.
If your FSA account was foreclosed on and you still had FSA debt, but you received an IRA assistance payment that paid off that debt, you may have been mailed an annual account statement on form FSA-2065. FSA is required to send this year end statement, which includes standard verbiage that states the borrower is "Not Released From Liability-Eligible For Further Collection Action." Please disregard this statement as it is not an accurate reflection of your account's current standing. You are no longer liable for the debt that was paid-in-full and FSA will not take further collection action.
USDA cannot provide tax advice and encourages borrowers to consult their own tax professional, but FSA is providing educational materials for borrowers to be aware of the options.
In early April, USDA will send a specific set of materials and resources to borrowers that received assistance in 2022, including a link to a webinar hosted by a group of farm tax experts to provide education on the options available. You can also register for the webinar here.
General
- Video: July 12 Webinar - Ag Taxes: What New Farmers Should Know
- Presentation: July 12 Webinar - Ag Taxes: What New Farmers Should Know
- Extension Article: Farm, Farming and Who's A Farmer
- Extension Article: How to Choose a Tax Professional
- Video: Using the Tax Calculator
- Upcoming: December 2022 - This video will be redone to include IRA payments.
Crop Disaster Payments
- Video: Weather - Related Sales of Livestock: Income Tax Management Issues
- Presentation: Weather - Related Sales of Livestock: Income Tax Management Issues
- Extension Article: Weather - Related Sales of Livestock
- Video: Disaster and Casualty Losses: Related Tax Rules
- Presentation: Disaster and Casualty Losses: Related Tax Rules
- Extension Article: Disaster Losses and Related Tax Rules
Additional Tax Information
- Video: Self-Employment Tax
- Presentation: Self-Employment Tax
- Extension Article: Self-Employment Tax
- Extension Article: The Optional Method of Paying Self-Employment Tax
- Video: Hobby vs. Trade or Business Farming Taxes
- Presentation: Hobby vs. Trade or Business Farming Taxes
- Extension Article: Farm Losses versus Hobby Losses
Assistance for Distressed Borrowers
- Video: Form 1099 Information Returns
- Presentation: Form 1099 Information Returns
- Extension Article: Form 1099 Information Returns
- Video: IRA Relief Payments
- Presentation: Inflation Reduction Act: Farm Loan Relief Program Payment
- Extension Article: Farm Loan Immediate Relief for Borrowers with At-Risk Agricultural Operations
Tax Estimator Tool
The Tax Estimator Tool is an interactive spreadsheet that producers can download to estimate tax liability. It is for informational and educational purposes and should not considered tax or legal advice. Producers may need to work with a tax professional to determine the correct information to be entered in the Tax Estimator Tool.
The tool is available at Tax Estimator (ruraltax.org)
Filing Your Taxes
How to Find a Reputable Tax Preparer or Accountant
There are various types of tax return preparers, including certified public accountants, enrolled agents, attorneys, and many others who don't have a professional credential. You expect your preparer to be skilled in tax preparation and to accurately file your income tax return.
The IRS has several useful resources to ensure that your taxes are filed by a knowledgeable tax professional. See the following resources or visit www.irs.gov:
Directory of Federal Tax Return Preparers with Credentials and Select Qualifications
How to Prepare for Your Meeting with a Tax Preparer
Before meeting with a tax consultant or accountant, here are some important things to do or consider:
- Gather all 1099, 1098 and other tax forms issued by USDA.
- If you have a Farm Loan, visit the self-service website on farmers.gov to view your loan information, history, and payments.
- Crop insurance proceeds must be included in your farm income.
Farmers can deduct certain conservation-related expenses. According to the IRS, you may deduct up to 25 percent of your gross farm income for conservation expenses.
How to get Copies of Your USDA Documents
If you haven’t received your USDA 1099 or 1098 forms, there are several helpful resources:
- For NRCS-related 1099 forms, contact the 1099 Help Desk for reprints at 1-800-421-0323. You may also send an email to 1099helpdesk@usda.gov.
- For FSA-related 1098 forms, call 866-729-9705.
Or visit your local USDA service center. To find yours visit: farmers.gov/service-locator.
This webpage and its resources are part of a broader effort by USDA to provide tax education and resources. USDA’s partners include the National Farm Income Tax Extension Committee and Extension Ag Tax Experts from around the country.
News and Resources
- Extension Article: Estate and Gift Tax
- Extension Article: Time Value of Money
- Website: Agricultural Financial, Tax and Asset Protection
- USDA Invests $14.5 Million in Taxpayer Education, Program Outreach Efforts for Farmers and Ranchers
- IRS Taxpayer Advocate Service
- RuralTax.org
- Rural Tax Education: Small Farm Tax Guide
- Economic Research Service
- Farm Service Agency’s Outreach and Education webpage
- Natural Resources Conservation Service’s Outreach and Advocacy webpage
- New Farmer Training
- USDA Equity Commission
Find Your Local Service Center
USDA Service Centers are locations where you can connect with Farm Service Agency, Natural Resources Conservation Service, or Rural Development employees for your business needs. Enter your state and county below to find your local service center and agency offices. If this locator does not work in your browser, please visit offices.usda.gov.
Visit the Risk Management Agency website to find a regional or compliance office or to find an insurance agent near you.