# taxed?



## brettz (Jun 21, 2013)

I work full time and farm on the side. It started just selling extra eggs. Now I sell goats and am hoping to sell milk this spring. In the future I may sell produce, fruit, honey and seed garlic. I'd be interested to hear from folks with thoughts on the matter of taxes - those who declare and those who do cash-only and don't file taxes for their farm income/expenses. I understand if this is your full-time job you very likely are filing taxes but I'd be curious to hear from those who do this in addition to a "day job" (even though this feels like my day job).


----------



## Michael W. Smith (Jun 2, 2002)

You can start up a Farm operation.

I did that for awhile when I was big into selling chicken eggs and broilers.

Went through all the paperwork to get a farm tax exempt number and everything.

Pros of it - I could claim all expenses from the farm on my taxes.

Cons of it - You have to keep good records.
- The days of doing taxes yourself are over - you have to pay someone to do them because you DON'T want to mess up!
- The State and Federal government have information on you.

If you get audited and the government decides your "farm" isn't a farm, but is more a hobby, you lose the tax benefits - and they might decide to look into all your past year's taxes for the hobby, no longer a farm.

I've heard it said that if your farm loses money for more than 4 or 5 years, the government will be checking into how you can continue to run a business that loses money.

I did if for a few years and then decided it just wasn't worth it.

And actually, even if you don't claim the farm income / expense, I believe the government believes ANY income you get should be on your taxes.


----------



## edcopp (Oct 9, 2004)

This is America. Paying taxes on income is not optional it is required.:thumb:

Just call the IRS if you need directions.


----------



## brettz (Jun 21, 2013)

Michael, thanks, that's helpful. I've been declaring all of my profits and all of my expenses but it has come out a loss the first couple years. I think it makes sense to keep on trucking for a couple/few more years and if I'm not making a profit once the initial investments are over with then it makes sense to relegate it to hobby-dom rather than trying to make it a successful business. I suppose that's a business 101 question and answer 

edcopp, your response is less helpful. I have paid taxes every year of my adult life and I know what country I live in. I understand that it's illegal to not pay taxes on income. I should have worded my initial question differently but stating the obvious seems a waste of everyone's time.


----------



## bigjon (Oct 2, 2013)

cash and carry=hobby


----------



## Michael W. Smith (Jun 2, 2002)

brettz said:


> I've been declaring all of my profits and all of my expenses but it has come out a loss the first couple years. I think it makes sense to keep on trucking for a couple/few more years and if I'm not making a profit once the initial investments are over with then it makes sense to relegate it to hobby-dom rather than trying to make it a successful business.


It's all legal - so if it works continue to do so. I ended up quitting because after doing it for a few years, the fun left it. It became more of a job - caring for all the chickens and having to go out and sell eggs. I ended up downsizing and figured it just wasn't worth it anymore.

I think a lot of farms though don't make money. By the time expenses are paid and some new equipment bought - the farm is at a loss. As long as there is money coming in and going out, I don't think the government cares too much.

My Dad had an actual farm operation - beef cattle, and expenses always outweighed profit. He never got audited. I think a problem would come up though if you have $3000.00 in expenses and only $50.00 in income.

Good luck.


----------



## Eco- (Jan 24, 2015)

It's rather easy to have "$3000.00 in expenses and only $50.00 in income.
" A start up farm might buy a tractor $20,000, build a small barn $4,500, invest in some chickens, goats and pigs $3000 and earn nothing the first year. The second year they might expand into fruit trees and other crops that are not going to show a profit for years. Oh and that second year might only show a little profit from selling a pig or goat. This can go on and on and is watched by the IRS at some point they can declare a business a hobby but with farming, a profit is hard to expect in the first years.....and even down the road. 

Brettz, spend a few hundred and talk to an accountant. What you can write off *might* make it attractive. The farm tax rate, the deduction for your home office if you use a room for an office, basement space for farm storage, the heat needed to heat the office and storage.....dedicated farm truck....gas and repairs for the truck. Tons of stuff can be legit write offs.

Good luck


----------



## edcopp (Oct 9, 2004)

brettz said:


> Michael, thanks, that's helpful. I've been declaring all of my profits and all of my expenses but it has come out a loss the first couple years. I think it makes sense to keep on trucking for a couple/few more years and if I'm not making a profit once the initial investments are over with then it makes sense to relegate it to hobby-dom rather than trying to make it a successful business. I suppose that's a business 101 question and answer
> 
> edcopp, your response is less helpful. I have paid taxes every year of my adult life and I know what country I live in. I understand that it's illegal to not pay taxes on income. I should have worded my initial question differently but stating the obvious seems a waste of everyone's time.


You obviously have little accurate knowledge of IRS tax law. 

For some people the tax laws can work to an advantage, and for others who already have all the answers it can become a nightmare.

Your choice.:hammer:


----------



## brettz (Jun 21, 2013)

OK - that helps a lot. My record keeping has gotten a lot better and I do plan on seeing an accountant this year to make sure I'm doing everything correctly. The cash-and-carry as a hobby may be the more appealing option depending on how the next couple years go now that my previous investments are starting to come to fruition. But, as you said Eco, there always seems to be something to expand into (bees, fruit, different crops, etc) so the money earned always seems to find its way back into the farm. Which I have no problem with - I just want to make sure that's a normal process. The accountant will definitely help but it's really useful to me to hear others' experiences/opinions as well so thanks for the contributions. 

And, you're right, ed. I have zero knowledge of IRS tax laws. Thank you for the condescension. But, I'm aware of my ignorance and that's why I'm asking for advice here, as well as seeking the help of a qualified tax professional. I appreciate opinions and knowledge from as wide a group as possible so it's useful for me to ask real humans for their experience in addition to talking to professionals. Where my appreciation stops is when people make short, snarky comments intended to display my ignorance rather than helping to replace it with actual, useful knowledge. But, you do have a good grasp on how to use the icons on this forum. Good on ya.


----------



## okiemom (May 12, 2002)

a tax person is invaluable in farming. If you have to pay for land tractors etc. you will never make a "profit" the profit is from selling regardless of the cost of the land tractors etc. we bought land the tractors and the cows and our profits are from selling the calves a couple times a year. we will never make a profit when land is $3000. an ac. the tractors are $20,000+. The tax firm knows how to deal with it as long as the records are kept and true effort is being made to run it as a business. Profits only happen if everything is passed down from previous generations.

$300,000 for 100ac. of land in Okla.
$50,000. in equipment tractors, trucks, feed bunks, hay rings, etc
$ 50,000 hay/eq. barn
$20,000 in cows

$4,000 in hay/feed minerals
$300. fuel

$8,000 in sales of calves. That is your "profit" everything else is a deduction against outside earnings. 

raising kids on a farm priceless.


----------



## am1too (Dec 30, 2009)

edcopp said:


> This is America. Paying taxes on income is not optional it is required.:thumb:
> 
> Just call the IRS if you need directions.


Yeah they'll give em to ya. They either wouldn't or couldn't even tell me what forms I needed for my taxes.


----------



## hjnaquin (Feb 26, 2015)

am1too said:


> Yeah they'll give em to ya. They either wouldn't or couldn't even tell me what forms I needed for my taxes.



The IRS is quick to tell you what you're doing wrong or that you owe more than originally stated, but it's like an act of congress to get your questions answered. They wanted me to hire a CPA to figure everything out for my previous (failed) business. Because I just have all sorts of money to just burn (keyword FAILED business).


----------



## Ziptie (May 16, 2013)

We just took our taxes to be done by a professional. We only sold two steers but received over $2,000. Talking with her we are doing a schedule F, but we could have easily filed the income as a hobby and took deductions from that section. 

Reason we are going for the F is we are considered residential for property tax purposes but zoned agricultural. I have to file a schedule F for three years to prove I am a farm to get the county to maybe change it to ag. No one in the county would tell me if that residential rating would limit us having animals. 

Don't have the taxes back yet. It will be interesting to see how she fills out the forms.

I sure wish we would go to a flat tax system. It would make life so much easier for everyone.:idea:


----------



## am1too (Dec 30, 2009)

hjnaquin said:


> The IRS is quick to tell you what you're doing wrong or that you owe more than originally stated, but it's like an act of congress to get your questions answered. They wanted me to hire a CPA to figure everything out for my previous (failed) business. Because I just have all sorts of money to just burn (keyword FAILED business).


Yeah and they're real quick to refuse to go by the law. Ask me how I know. It cost me $3,000. Appealing would with a lawyer cost $3500. So the smart thing was to let them steal $3000 from me. Then the state demanded almost a $1000 plus interest after a year. You're right I'm not a happy camper.


----------

