Don’t Forget to Account for USDA Payments this Tax Season

From cropping decisions to marketing strategies, new farmers can face a steep learning curve.  USDA offers technical assistance, loans, conservation programs, and other financial support to help farmers get their operations started.

USDA technical assistance is free and creates no tax implications.  However, USDA issues 1099 forms for any farmer payments. It also 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.

For example, 1099 forms are issued for Conservation Reserve Program rentals payments, conservation program financial assistance, Market Facilitation Program payments, crop disaster payments, Farm Loan debt forgiveness. USDA issues 1098 forms to report a Farm Loan borrower’s interest paid, because it is a deductible expense.

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.     
• Visit your local USDA service center.

It’s important to not overlook USDA payments when calculating your taxes, according to veteran farmer Tim Palmer from Truro, Iowa. He strongly encourages using a professional accountant or tax preparer. “The only constant with tax laws is change,” he said.

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.

Keeping good expense records will help your tax preparer determine the tax deductions you may claim. While it’s best to ask for professional assistance, there are helpful resources through IRS and local extension offices. Here are links to some helpful websites:

• https://www.irs.gov/publications/p225 (Publication 225 (2019), Farmer's Tax Guide)
• https://newfarmers.usda.gov/taxes (New farmer resources from USDA)
• https://ffsc.org (Record keeping assistance)