![]() ![]() The producer may also have employees perform tasks that they cannot do because of time constraints. The producer spending most of their personal time on the farming operation can indicate they are trying to be profitable. Time and effort spent on the operation in hopes to make it profitable.A business plan can also demonstrate that you take the farming operations seriously and are interested in its success. One way to make sure you meet this guideline is to have separate bank accounts for the farm and personal use. Operate your farm in a businesslike manner.It is worth noting that if audited, it is the taxpayer/farmer’s responsibility to show proof of meeting the guidelines. Those factors are covered below, as are ways in which a producer can make sure they are not a hobby farm. The IRS has nine factors they use to determine the status of the farming operation. It is all about the management of the farm. The size of the farming operation is irrelevant in determining if a farming operation is a business or a “hobby”. However, if the IRS considers farming activities to be a “hobby”, then any losses cannot be used to offset income in other areas by the taxpayer. If a business has a net loss for the year, then that loss can be used (with some limitations) to reduce other income realized by the taxpayer. ![]() This is a very important distinction to both the farmer and the IRS due to the IRS treatment of business income versus “hobby” income. Many producers that have both farm and non-farm income, may question if the IRS considers their farming activities to be a “business” or a “hobby”. Author(s): Tarrah Hardin Published: June 29th, 2021 Shareable PDF ![]()
0 Comments
Leave a Reply. |