Taxes and USDA Programs

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.

Upcoming Webinars

Event: Hobby Losses
Date: Monday, October 17, 2022
Time: 2:00 PM-3:30 PM Eastern

Register in advance for the webinar on October 17, 2022.

Preparing for Tax Season

Who Is a Farmer for Tax Purposes?

The term “farm” includes stock, dairy, poultry, fruit, furbearing animal, and truck farms, plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards and woodlands.

A farmer is an individual who is engaged in farming per the definition found above.  Generally, the farmer has a profit motive when operating a farming business.

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;
  • Farm loan debt forgiveness; and
  • 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.

What Training Resources are Available?

FSA is working with farm tax experts throughout the country to compile resources as part of the Taxpayer Education and Asset Protection effort. Webinars and information for new and established farmers are available with more coming soon. 


 

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

Choosing a Tax Professional

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.

Every Season is Scam Season

Remember to discuss your USDA account information only with people you recognize and trust.

It's important to note that USDA Agencies contact customers/producers concerning financial payments and other legal actions through regular or certified mail, delivered by the U.S. Postal Service.

USDA does not:

  • Demand payment using a prepaid debit card, gift card, or wire transfer
  • Demand immediate payment over the telephone
  • Ask for debit or credit card number over the telephone
  • Threaten to contact the local police, immigration officers, or other law enforcement agencies for nonpayment.

If you receive any suspicious calls or have questions about your USDA accounts, contact your local USDA Service Center Office by visiting: https://www.farmers.gov/service-locator.

Find Your Local Service Center

We are committed to delivering USDA services to America’s farmers and ranchers while taking safety measures in response to the pandemic. Many USDA Service Centers are open for visitors, but some may remain open by appointment only. Contact your local Service Center to determine their open status or make an appointment. Service Center staff continues to work with agricultural producers via phone, email, and other digital tools. Learn more at farmers.gov/coronavirus.

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.