Anyone actively engaged in farming activities must file Schedule F along with the standard Federal Income Tax form 1040. The form itself is similar to Schedule C except it contains special items pertinent only to farmers as business owners. The form starts with a declaration of accounting method, cash or accrual, for the tax year. Following this declaration, farmers must then fill in certain sections of the form depending on the accounting method used.
Like Schedule C, farmers itemize their farming activities under two main headings: those items that contributed to income and those that contributed to expenses in direct operation of the farm. Income items include sale of livestock, produce, grains, and other goods produced and sold in the tax year. Expenses include vehicles, chemicals, conservation expenses, feed, fertilizer, freight, and depreciation of long-term assets.
As a last requirement, farmers must indicate, using a six-digit code, the number which best describes their farming activities. The farming activities are broken down into three main categories and include crop production, animal production, and forestry and logging. These main categories are further broken down into sub-categories such as vegetable farming, fruit and tree nut farming, beef cattle ranching, aquaculture, and poultry and egg production. These farming classifications are gathered to facilitate the administration of the Internal Revenue Code.
