In an effort to uncover compliance issues on Form 1040 Schedule F (Profit or Loss from Farming) tax returns, the IRS has announced a pilot program to audit expenses taken by filers of this schedule. Taxpayers are being asked to provide documentation that substantiates the deductions taken on their Schedule F. Reasonable, ordinary, necessary, and business-related expenses may be deducted, but items related to the taxpayer’s W-2 job, their Schedule A, or a Corporate return should not be included.

This IRS Schedule F Audit Report explains the details of the new Pilot Program and to see how the IRS will look at prepaid expenses, personal expenses, capital expenditures, and other farm specific matters.

If you have questions related to deducting farm expenses, please contact us and we will be glad to help!