Schedule F (Form 1040) Tax Year 2013: Filing Checklist
Understanding Schedule F for 2013
Schedule F reports profit or loss from farming for the tax year 2013. The 2013 version includes Section 451(d) crop insurance deferral election on lines 6a-6d, allowing cash-method farmers to postpone eligible disaster payments to 2014. The principal agricultural activity on line B requires a six-digit NAICS code. For 2013, the Section 179 maximum deduction is $500,000 with a phase-out beginning at $2,000,000 of qualified property. Up to $250,000 of the $500,000 limit applies to qualified real property (leasehold improvements, restaurant property, and retail improvements).
Applicable Programs for 2013
Cash-method farmers can defer crop insurance proceeds and federal disaster payments to 2014 by marking the checkbox on line 6c and attaching a signed statement that meets the Section 451(d) requirements. The deferral applies only if the farmer’s established practice demonstrates that more than 50% of the damaged crop’s income would generally be reported in the following year. The election is binding for all eligible proceeds from a single farm business.
Step-by-Step Filing Instructions
Step 1: Select Accounting Method
Determine whether your farm uses cash or accrual accounting. Cash-method farmers complete Part I (lines 1-9) and Part II (lines 10-33). Accrual-method farmers complete Part III (lines 37-50) and Part II. Cash method reports income when received and expenses when paid. The accrual method reports income when earned and expenses when they are incurred.
Step 2: Attach to Appropriate Form
Attach completed Schedule F to Form 1040 for individuals, Form 1040NR for nonresident aliens, Form 1041 for estates and trusts, Form 1065 for partnerships, or Form 1065-B for electing large partnerships.
Step 3: Enter Agricultural Activity Code
Enter the six-digit NAICS code on line B. Standard codes include Oilseed and Grain Farming (111100), Vegetable and Melon Farming (111200), Dairy Cattle Production (112120), Beef Cattle Ranching (112111), Poultry and Egg Production (112300), and other classifications from the Part IV table.
Step 4: Gather Income Documentation
Collect Forms 1099-MISC for crop insurance proceeds, Forms 1099-G or CCC-1099-G for federal disaster payments, Schedule 1099-G for agricultural program payments, and documentation for commodity sales, cooperative distributions, and custom hire income.
Step 5: Evaluate Crop Insurance Deferral Election
If 2013 was the year of crop damage and your standard practice is to report more than 50% of the crop’s income in the following year, mark the checkbox on line 6c and attach a signed statement. The statement must identify the crop, the cause of damage, the insurance carrier or federal program, and the payment amount. This election is binding and applies to all eligible proceeds from your farm business.
Step 6: Report Farm Income Under Cash Method
Complete Part I if you are using the cash method. Enter livestock and resale item sales on line 1a, crop sales on line 2, cooperative distributions on line 3a, agricultural program payments on line 4a, CCC loans reported as income on line 5a, crop insurance and disaster payments on line 6a, other commodity program income on line 7, and other farm income on line 8. If deferring payments under Section 451(d), subtract the deferred amount on line 6b and enter the result on line 6d. Total all income on line 9.
Step 7: Report Farm Income Under Accrual Method
Complete Part III if you are using the accrual method. Enter sales of products raised on line 37, purchased resale items on line 39, cooperative distributions on line 40a, program payments on line 41a, CCC loans on line 42a, crop insurance proceeds on line 43, custom hire income on line 44, and other income on line 45—total on line 46. Enter beginning inventory on line 47, ending inventory on line 48, and cost of items purchased on line 49. Calculate net income on line 50 and carry to Part I, line 9.
Step 8: Complete Farm Expense Deductions
Report expenses on lines 10-32 of Part II. Enter car and truck expenses on line 10, chemicals on line 11, conservation expenses on line 12, custom hire on line 13, depreciation and Section 179 on line 14, employee benefits on line 15, feed on line 16, fertilizers on line 17, freight on line 18, fuel on line 19, insurance on line 20, mortgage interest on lines 21a-21b, labor on line 22, pension plans on line 23, rent or lease on lines 24a-24b, repairs on line 25, seeds on line 26, storage on line 27, supplies on line 28, taxes on line 29, utilities on line 30, veterinary on line 31, and other expenses on line 32—total expenses on line 33.
Step 9: Claim Depreciation and Section 179
If claiming depreciation or Section 179 on line 14, attach Form 4562. For 2013, the maximum Section 179 deduction is $500,000 with a phase-out threshold of $2,000,000. Up to $250,000 of the $500,000 total applies to qualified real property. Calculate amounts on Form 4562 and enter on Schedule F, line 14.
Step 10: Determine Material Participation
Answer line E regarding material participation. Mark “Yes” if you participated more than 500 hours, your participation was substantially all participation, you participated more than 100 hours and at least as much as any other person, the activity is significant and total participation exceeded 500 hours, you materially attended five of the prior ten years, the activity is personal service and you participated three previous years, or you participated regularly, continuously, and substantially. If you mark “No” and report a loss, complete Form 8582 for passive activity loss limitations.
Step 11: Determine At-Risk Status
Answer line 35a if all investments are at risk, or line 35b if some investments are not at risk. Investment at risk includes cash contributed, property contributed, and amounts borrowed for which you are personally liable. Investment not at risk includes nonrecourse loans (except qualified nonrecourse financing), amounts protected against loss, and amounts borrowed from related parties. If some investment is not at risk and you report a loss, complete Form 6198.
Step 12: Calculate Net Farm Profit or Loss
Subtract line 33 (total expenses) from line 9 (gross income) to calculate net profit or loss on line 34. If positive, report as farm income on Schedule 1 (Form 1040), line 18. If negative, subject to limitations, report as loss on Schedule 1, line 18.
Step 13: Apply Loss Limitations
If line 34 shows a loss, apply at-risk limitations using Form 6198 if you marked line 35b. Your deductible loss cannot exceed your at-risk amount. Apply passive activity limitations using Form 8582 if you marked “No” on line E. Passive losses can only offset passive income. Suspended losses carry forward to future years.
Step 14: Answer Form 1099 Question
Answer line F regarding whether you made payments requiring Form 1099 preparation. Mark “Yes” if you paid $600 or more to individuals or partnerships for services, or $10 or more in royalties. Mark “No” if you made no such payments. If “Yes,” ensure all required Forms 1099 were filed by February 28, 2014 (March 31, 2014 if electronic).
Step 15: Attach Required Forms
Attach Form 4562 if claiming depreciation or Section 179, Form 6198 if amounts are not at risk and you reported a loss, Form 8582 if you did not materially participate and reported a loss, and the signed Section 451(d) election statement if deferring crop insurance proceeds. Include Forms 1099-MISC, 1099-G, CCC-1099-G, and cooperative statements.
Step 16: Sign and File
Sign and date Schedule F with the same signature as your primary return. Enter your farming occupation. If filing jointly and both participated, both spouses must sign. Attach Schedule F to your primary return. Mail to the appropriate IRS address based on location and payment status. The deadline is April 15, 2014. File Form 4868 by April 15 if you need an extension.
Special Considerations
Nonresident Aliens
Nonresident aliens using Form 1040NR report farming income on Schedule F only if the income is effectively connected with a U.S. trade or business. Passive farming investment income requires different treatment on Schedule NEC.
Passive Loss Limitations
Suppose you answered “No” to material participation and reported a loss—complete Form 8582 to calculate allowable deductions. Passive losses offset only passive income. Suspended losses carry forward to offset future passive income or are deducted when disposing of your entire interest.
At-Risk Limitations
If some investment is not at risk and you reported a loss, complete Form 6198. Deductible losses are limited to at-risk amounts. Suspended at-risk losses carry forward and become deductible when you increase at-risk investments.
Crop Insurance Deferral
The Section 451(d) election allows cash-method farmers to defer crop insurance and disaster payments to the following year if everyday practice demonstrates that more than 50% of the crop’s income is reported the year after damage. The election is binding and cannot be partially applied. Consider tax implications before making an election, including potential higher rates in the deferral year.
By following these steps and maintaining accurate records, you ensure proper Schedule F completion for tax year 2013 and compliance with farming income reporting requirements.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
