Ah, if it were that good....
You will fill out a regular 1040.
You will need to fill out a schedule F, which figures out your farm gross income.
You wll fill out a complicated depreciation schedule, which lists the major purchases you have made, and assigns a portion of each purchase to this year as a deduction against your gross income.
You will file the Social Security form, paying over 15% of any profit you make in SS taxes.
You _must_ figure out your farm taxes by the end of February. If you owe, you must pay by March 1st. If you do not owe taxes, then you don't have to file earlier than 'normal.'
Deductions are broken into 3 areas:
Seed, fuel, fertilizer, and other things consumed in one year are all deducted as expenses.
Machines like tractors, plows, mowers, hoes, rakes, wheel barrows, etc. are often considered mid-term expenses, and ard their costs are deducted 1/7 for each of the next 7 years. In special cases you can deduct it all quicker, but it gets complicated. If you re-sell these items down the road, you will need to repay the taxes you saved on them - buy a tractor for $10,000, use it for 7 years, sell it then for $5000, and you will only be allowed to keep the deductions you took on the $5000 - you will need to claim the $5000 you got for the tractor basically like income again...)
Major structures like buildings, greenhouse, tiling, irrigation wells, etc. are considered long term expenses, and are typically deducted over a 20 year period.
If you are serious about doing farming full time for all your income, it is well worth spending $500 on a good CPA who understands farm taxes. There are many games to play, and ways to average your income & expenses to avoid some taxes for some time. Eventually they will get their tax money, but you can avoid some social Security taxes and you can push off income taxes and end up paying capital gains taxes instead many years in the future - which is a good way to go.
Many in farming are very cash-poor, but gain assets until they retire, in order to play the tax games that way.
Again, if you are really looking to make more than a couple thousand bucks a year at farming, the CPA will think of many things you have never thought of to make tax time much easier for you.
If you make $25,000 gross for the year & don't plan things out well, you might owe 15% fedral & 5% state taxes on $15,000, and 15.5% Social Security tax on $10,000.
Real shock if you are used to having your taxes withheld, and all of a sudden in February realize you need to mail in $4550 taxes you never thought about.....
With planning & a good CPA, you might get that to owing only $2000, and you will be prepared for having your paperwork in order & know what the bill will be ahead of time...... Even if the CPA charges $500, he's saving you $1500.....
Those depreciation schedules are where you can play around, take more now or later, and make your expenses match your projected income. If you have a bad year farming, put off deductions until another year. If you expect to make a lot more next year, you can plan to keep yourself in the lowest tax bracket & save.
Think about a good CPA......
--->Paul
