Income Taxes

IRS Requirements

Start here if you are unsure if you need to file a federal income tax return reporting your farming ranching or fishing business activities, or if you do not know what records the IRS requires you to keep. 

Lesson 1

Lesson 1 covers the requirements for filing federal income tax returns and when it is required or recommended to begin reporting activities associated with a new farm or ranch business. This lesson is for you if: 

• You are unsure if you need to file federal income tax returns to report your farming or ranching income and expenses. 
• You are developing your business but do not yet have products to sell. 
• You have not yet had a net profit from your business. 
• You are in the research, exploration, or development phase of your business.
• You describe your farming or ranching activity as a hobby.
• You farm or ranch to support your community, or participate in your cultural traditions or support others in doing so.

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This presentation has the slides from the video but does not have the additional information provided by the speakers in the recording.

Download Presentation Speaker Notes (PDF)

These written materials have some of the same information as the recorded presentation, plus additional information.

You can read more about your filing requirements in the Supplemental Learning Center at TF. Income Tax Filing Requirements

Preparing Your Taxes

These three resources will help you to make a plan to get help filing your taxes. They include a description of the different types of help available, information about the FarmLink Income Tax Organizer, and the FarmLink Taxpayer Return Review Checklist. 

Use the FarmLink Income Tax Organizer if: 

• You have not previously filed a tax return reporting income and expense for your farming or ranching business
• You have filed before, but you are not certain that you filed correctly, or you think you may have missed some items associated with your agricultural business 
• You use a paid tax preparer, especially if you are using a new tax preparer or having your taxes prepared for the first time
• You are behind on your taxes and need to organize information for one or more prior years
• You plan to do your own tax returns using online tax preparation software
• You have not kept all of your business income and receipts organized during the year and need to get them all organized now to prepare your tax return

California FarmLink Farm Tax Organizer (Current for Tax Years Through 12/31/2025)

California FarmLink Tax Organizer Instructions and Overview (PDF)

Taxpayer Return Review Checklist (PDF)

Use the FarmLink Tax Review Checklist If you have your tax return prepared by someone else, use this checklist to guide your review of the tax return and help you to ask your tax preparer for additional information. 

You can also access this information about preparing federal income tax returns from the Supplemental Learning Center at PT. Preparing Income Tax Returns. 

How Individuals and Entities Report

The next two lessons discuss how different types of income are reported on the income tax returns of individuals and business entities. 

Lesson 3

Lesson 3 explains the important elements of a federal income tax return for an individual or married couple. It shows how farm or ranch income is reported on the income tax return of the owner, and discusses self employment tax and income tax.  This lesson is important if: 

• You want to learn about self-employment taxes, on your farm/ranch earnings
• You do not know if you pay pay self-employment taxes on your farm/ranch earnings
• You are legally married to someone who also works in your farm/ranch business
• You may qualify for the Earned Income Tax Credit (EITC)

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This presentation has the slides from the video but does not have the additional information provided by the speakers in the recording.

Download Speaker Notes (PDF)

These written materials have some of the same information as the recorded presentation, plus additional information.

Lesson 4

Lesson 4 explains when you may be required to file a partnership tax return, and introduces S-corporations, which file separate tax returns. 

• Is your farm/ranch business owned by two or more people who are not married?
• Have you created a limited liability company (LLC) or limited partnership to operate your business?
• Are you interested in creating a separate entity to limit personal liability?
• Is your business consistently profitable with net income of  $100,000 or more in most years?
• Are you interested in bringing the next generation or an unrelated person into the business?

If you answered “yes” to any of these questions, Lesson 4 will have valuable information for you.   

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This presentation has the slides from the video but does not have the additional information provided by the speakers in the recording.

Download Speaker Notes (PDF)

These written materials have some of the same information as the recorded presentation, plus additional information.

Special Rules for Agriculture

If you have a good understanding of the basics, then you know that you have just begun to scratch the surface of federal taxation and you are ready to focus on specific topics. These next two lessons provide an overview of special tax rules for agricultural income and deductions.

Lesson 5

Lesson 5 covers special rules for agricultural income. This lesson will be valuable if: 

• You have other activities on your land like camping, weddings, or classes.
• You make and sell processed products like cheese, wine, or baked goods.
• You would like to learn about special rules for 
  
  • Estimated tax payments for farmers
  • Farm/ranch bankruptcy
  • Agricultural debt relief
  • Income Averaging for farmers and ranchers

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This presentation has the slides from the video but does not have the additional information provided by the speakers in the recording.

Download Speaker Notes (PDF)

These written materials have some of the same information as the recorded presentation, plus additional information.

Lesson 6

Lesson 6 is actually 7 lessons! This lesson has important information on advanced and specialized topics. Choose the topics that pertain to your situation. 

Lesson 6.1: USDA Payments

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Lesson 6.2: Debt Relief

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Lesson 6.3: Mixed-Use Real Property

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Lesson 6.4: Value-Added Inventory

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Lesson 6.5: Conservation Expenditures

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Lesson 6.6: Catastrophe and Disasters

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Lesson 6.6.a: Livestock Losses and Weather-Related Sales

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Selected Advanced Topics 

These resources offer a deeper dive into a few select topics in agricultural taxation. 

You can read more about income tax topics in the Supplemental Learning Center at TI. Taxable Income and AT. Assets and Taxes. 

5.1 Asset Transfers

Tax Issues for Asset Transfer

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This presentation will help you understand the tax consequences of transferring or receiving assets via gift, grant, sale, or inheritance. It explains capital gains tax, sales tax, estate, and inheritance tax. This material is particularly relevant to people who are thinking about estate and succession planning. 

5.2 Conservation Payments

Tax Treatment of Conservation Payments

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These materials are designed to help you understand how to report income received under California’s Healthy Soils Program, or under other state and federal conservation programs. We will review the general rules regarding reporting taxable income and associated expenses for a business, and then discuss special IRS rules for conservation payments and expenses. Then we will put those two concepts together and work through a few examples to illustrate situations that might result in taxable net income and strategies to minimize taxes. We will end with a discussion of additional resources and how to get help filing income taxes. 

5.3 Consequences of Disaster

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Disaster can have some counter-intuitive effects on your federal income tax returns, sometimes creating taxable income even when you have experienced real loss. Fortunately there are special rules to mitigate these effects for farmers, ranchers and fishers. This presentation will help you to understand why you need a qualified tax preparer to help you after a disaster, and will help you identify the specific issues you need to discuss with your tax preparer. There is a video with the instructor presenting, and a copy of the presentation for you to use to take notes. 

Additional Resources

There are many additional resources for learning more about special issues in agricultural taxation, but these are the resources we use the most: 

IRS Pub 225 - The Farmers Tax Guide

RuralTax.org

Center for Agricultural Law and Taxation at Iowa State

TimberTax.org