taxmap/pubs/p225-000.htm#en_us_publink1000217598Publication 225
Acknowledgment:. The valuable advice and assistance given us each year
by the National Farm Income Tax Extension Committee is gratefully
acknowledged.
You are in the business of farming if you cultivate, operate,
or manage a farm for profit, either as owner or tenant. A farm includes
livestock, dairy, poultry, fish, fruit, and truck farms. It also includes
plantations, ranches, ranges, and orchards.
This publication explains how the federal tax laws apply to farming.
Use this publication as a guide to figure your taxes and complete your farm tax
return. If you need more information on a subject, get the specific IRS tax
publication covering that subject. We refer to many of these free publications
throughout this publication. See
chapter 16 for information on ordering these publications.
The explanations and examples in this publication reflect the
Internal Revenue Service's interpretation of tax laws enacted by Congress,
Treasury regulations, and court decisions. However, the information given does
not cover every situation and is not intended to replace the law or change its
meaning. This publication covers subjects on which a court may have made a
decision more favorable to taxpayers than the interpretation of the Service.
Until these differing interpretations are resolved by higher court decisions, or
in some other way, this publication will continue to present the interpretation
of the Service.
 | At the time this publication went to print, Congress was
considering legislation that could affect several tax law provisions. To find
out whether the legislation has been enacted, go to IRS.gov. |
taxmap/pubs/p225-000.htm#en_us_publink1000217599Provide America's taxpayers top quality service by helping them
understand and meet their tax responsibilities and by applying the tax law with
integrity and fairness to all.
taxmap/pubs/p225-000.htm#en_us_publink1000217600We welcome your comments about this publication and your suggestions
for future editions.
You can write to us at the following address:
Internal Revenue Service
Business Forms and Publications Branch
SE:W:CAR:MP:T:B
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would
be helpful if you would include your daytime phone number, including the area
code, in your correspondence.
You can email us at
*taxforms@irs.gov. (The asterisk must be included in the address.) Please put
"Publications Comment" on the subject line. You can also send us comments from
www.irs.gov/formspubs/index, select "Comment on Tax Forms and Publications" under "Information
about."
Although we cannot respond individually to each comment received,
we do appreciate your feedback and will consider your comments as we revise our
tax products.
taxmap/pubs/p225-000.htm#en_us_publink1000217601Visit
www.irs.gov/formspubs
to download forms and publications, call 1-800-829-3676, or write to the address
below and receive a response within 10 days after your request is received.
Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613If you have a tax question, check the information available on
IRS.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of
the above addresses.
taxmap/pubs/p225-000.htm#en_us_publink1000217603The Small Business and Agricultural Regulatory Enforcement Ombudsman
and 10 Regional Fairness Boards were established to receive comments from small
business about federal agency enforcement actions. The Ombudsman will annually
evaluate the enforcement activities of each agency and rate its responsiveness
to small business. If you wish to comment on the enforcement actions of the IRS,
you can:
- Call 1-888-734-3247,
- Fax your comments to 202-481-5719,
- Write to
Office of the National Ombudsman
U.S. Small Business Administration
409 3rd Street, S.W.
Washington, DC 20416 - Send an email to
ombudsman@sba.gov, or
- Download the appraisal form at
www.sba.gov/ombudsman.
If you want to confidentially report misconduct, waste, fraud,
or abuse by an IRS employee, you can call 1-800-366-4484 (1-800-877-8339 for
TTY/TDD users). You can remain anonymous.
taxmap/pubs/p225-000.htm#en_us_publink1000217605Many state Cooperative Extension Services conduct farm tax workshops
in conjunction with the IRS. Contact your county extension office for more
information.
The following items highlight a number of administrative and
tax law changes for 2010. They are discussed in more detail throughout the
publication. More information on these and other changes can be found on the IRS
website at
www.irs.gov/formspubs and click on
Highlights of Recent Tax Changes.
Standard mileage rate.(p2)
The standard mileage rate for the cost of operating a car, van,
pickup, or panel truck in 2010 is 50 cents per mile for all business miles
driven. See
chapter 4.
Increase in deduction for start-up costs.(p2)
For tax years beginning in 2010, you can elect to deduct up to
$10,000 of your business start-up costs paid or incurred after October 22, 2004.
See
chapter 4.
Limitation on excess farm losses.(p2)
For tax years beginning after 2009, your farm losses may be reduced
if you received certain subsidies. See
chapter 4.
Increased section 179 expense deduction dollar limits.(p2)
The maximum amount you can elect to deduct for most section 179
property you placed in service in 2010 is $500,000. This limit is reduced by the
amount by which the cost of the property placed in service during the tax year
exceeds $2 million. See
chapter 7.
Extension of special depreciation allowance for certain qualified
property acquired after December 31, 2007.(p2)
You may be able to take a special depreciation allowance for
certain qualified property acquired after December 31, 2007, and placed in
service before January 1, 2011. See
chapter 7.
Expiration of the special depreciation allowance for qualified
disaster assistance property.(p2)
The special depreciation allowance will not apply to qualified
disaster assistance property placed in service in federally declared disaster
areas where the disaster occurred after December 31, 2009. See
chapter 7.
Certain property eliminated from the definition of listed property.(p2)
For tax years beginning after 2009, cellular telephones and similar
telecommunications equipment have been removed from the definition of listed
property. See
chapter 7.
Expiration of the 5-year recovery period for certain machinery
and equipment.(p2)
Certain machinery or equipment used in a farming business and
placed in service after December 31, 2009, will no longer be treated as 5-year
property under MACRS. See
chapter 7.
Decrease in personal casualty and theft loss limit.(p2)
Each personal casualty or theft loss is limited to the excess
of the loss over $100 (instead of $500). In addition, the
10%-of-adjusted-gross-income (10%-of-AGI) limit continues to apply to the net
loss. See
chapter 11.
Disaster losses.(p2)
The special rules that were in effect in 2008 and 2009 for losses
of personal-use property attributable to federally declared disasters do not
apply to losses occurring in 2010 and later years. Instead, these losses will be
subject to the 10%-of-AGI limit and deductible only if you itemize your
deductions. These losses will continue to be subject to the $100-per-loss limit.
See
chapter 11.
Self-employed health insurance deduction.(p2)
For tax years beginning in 2010, you can deduct any self-employed
health insurance deduction you report on Form 1040, line 29, from
self-employment earnings. See
chapter 12.
Tax rates and maximum net earnings.(p2)
The maximum net self-employment earnings subject to the social
security part (12.4%) of the self-employment tax remains $106,800 for 2010.
There is no maximum limit on earnings subject to the Medicare part (2.9%). See
chapter 12.
Wage limit for social security tax.(p2)
The limit on wages subject to the social security tax for 2010
is $106,800, unchanged from 2009. There is no limit on wages subject to the
Medicare tax. See
chapter 13.
Qualified employer's social security tax credit.(p2)
Qualified employers are allowed a credit for their share (6.2%)
of social security tax on wages paid to qualified employees after March 18,
2010, and before April 1, 2010. See
chapter 13.
Qualified employer's social security tax exemption.(p2)
Qualified employers are allowed an exemption for their share
(6.2%) of social security tax on wages paid to qualified employees after March
31, 2010, and before January 1, 2011. See
chapter 13.
Expiration of the special depreciation allowance for specified
Gulf Opportunity (GO) Zone Extension property.(p2)
The special depreciation allowance will not apply to specified
GO Zone Extension property placed in service after December 31, 2010. See
chapter 7.
Maximum net earnings.(p2)
The maximum net self-employment earnings subject to the social
security part of the self-employment tax will remain $106,800 for 2011. There is
no maximum limit on earnings subject to the Medicare part. See
chapter 12.
Electronic deposit requirement.(p3)
The IRS has issued proposed regulations under section 6302 which
provide that beginning January 1, 2011, you must deposit all depository taxes
(such as employment tax, excise tax, and corporate income tax) electronically
using the Electronic Federal Tax Payment System (EFTPS). Under these proposed
regulations, which are expected to be finalized by December 31, 2010, Forms 8109
and 8109-B, Federal Tax Deposit Coupon, cannot be used after December 31, 2010.
See
chapter 13.
Advance payment of earned income credit (EIC).(p3)
The option of receiving advance payroll payments of EIC expires
on December 31, 2010. See
chapter 13.
The following reminders and other items may help you file your
tax return.
taxmap/pubs/p225-000.htm#en_us_publink1000217621
IRS
e-file (Electronic Filing)
You can file your tax returns electronically using an IRS
e-file option. The benefits of IRS
e-file
include faster refunds, increased accuracy, and acknowledgment of IRS receipt of
your return. You can use one of the following IRS
e-file options.
- Use an authorized IRS
e-file provider.
- Use a personal computer.
- Visit a Volunteer Income Tax Assistance (VITA) or Tax Counseling
for the Elderly (TCE) site.
For details on these fast filing methods, see your income tax
package.
Principal agricultural activity codes.(p3)
You must enter on line B of Schedule F (Form 1040) a code that
identifies your principal agricultural activity. It is important to use the
correct code because this information will identify market segments of the
public for IRS Taxpayer Education programs. The U.S. Census Bureau also uses
this information for its economic census. See the list of
Principal Agricultural Activity Codes on page 2 of Schedule F (Form 1040).
taxmap/pubs/p225-000.htm#en_us_publink1000217624Publication on employer identification numbers (EIN).(p3)
Publication 1635, Understanding Your Employer Identification
Number, provides general information on employer identification numbers. Topics
include how to apply for an EIN and how to complete Form SS-4.
taxmap/pubs/p225-000.htm#en_us_publink1000217625Change of address.(p3)
If you change your home or business address, you should use Form
8822, Change of Address, to notify the IRS. Be sure to include your suite, room,
or other unit number.
taxmap/pubs/p225-000.htm#en_us_publink1000217626Reportable transactions.(p3)
You must file Form 8886, Reportable Transaction Disclosure Statement,
to report certain transactions. You may have to pay a penalty if you are
required to file Form 8886 but do not do so. Reportable transactions include (1)
transactions the same as or substantially similar to tax avoidance transactions
identified by the IRS, (2) transactions offered to you under conditions of
confidentiality and for which you paid an advisor a minimum fee, (3)
transactions for which you have or a related party has a right to a full or
partial refund of fees if all or part of the intended tax consequences from the
transaction are not sustained, (4) transactions that result in losses of at
least $2 million in any single year or $4 million in any combination of years,
and (5) transactions with asset holding periods of 45 days or less and that
result in a tax credit of more than $250,000. For more information, see the
Instructions for Form 8886.
taxmap/pubs/p225-000.htm#en_us_publink1000217627Form W-4 for 2011.(p3)
You should make new Forms W-4 available to your employees and
encourage them to check their income tax withholding for 2010. Those employees
who owed a large amount of tax or received a large refund for 2010 may need to
file a new Form W-4. See Publication 919, How Do I Adjust My Tax Withholding.
taxmap/pubs/p225-000.htm#en_us_publink1000217628Form 1099-MISC.(p3)
Generally, file Form 1099-MISC if you pay at least $600 in rents,
services, and other miscellaneous payments in your farming business to an
individual (for example, an accountant, an attorney, or a veterinarian) who is
not your employee.
taxmap/pubs/p225-000.htm#en_us_publink1000217630Photographs of missing children.(p3)
The Internal Revenue Service is a proud partner with the National
Center for Missing and Exploited Children. Photographs of missing children
selected by the Center may appear in this publication on pages that would
otherwise be blank. You can help bring these children home by looking at the
photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a
child.
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