WHAT IS 'IRS Publication 225 or Farmer's Tax Guide'

IRS Publication 225, or the Farmer's Tax Guide, is a document published by the Internal Revenue Service.

BREAKING DOWN 'IRS Publication 225 or Farmer's Tax Guide'

IRS Publication 225, or the Farmer's Tax Guide, is a document that helps individuals involved in agribusiness navigate the farming-specific tax code. The document details and outlines how the federal government taxes farms. Individuals will be liable for taxes if the farm is operated for profit, whether the taxpayer owns the farm or is a tenant. IRS Publication 225 outlines the different accounting methods that farmers may use for running their operations and how farmers must report farm income.

Agribusiness is the business sector encompassing farming and farming-related commercial activities. The business involves all the steps required to send an agricultural product to market: production, processing, and distribution. Since farming as a business activity differs so significantly from most other businesses, special rules apply. There are special rules for deducting improvement costs, depreciation of machinery and reporting of crop rents.

Other Agribusiness-Specific Tax Code and Assistance

Along with IRS Publication 225, the IRS publishes IRS Publication 51, a document specific to the employers of agricultural workers. Publication 51 provides guidance on how individuals who employ workers in the agribusiness must comply with tax withholdings. Sometimes the U.S. Department of Labor requires employers to register with them, and also does not allow employers to label farm employees as independent contractors.

Not only does the IRS publish these specific guides, but income from a farm itself incurs a special designation. According to U.S. agricultural policy, farm income can be divided into Gross Cash Income, Gross Farm Income, Net Cash Income and Net Farm Income. Gross Cash Income refers to the sum of all receipts from the sale of crops, livestock and farm-related goods and services, as well as any direct payments from the government; whereas Gross Farm Income refers to the the same sources as Gross Cash Income with the addition of non-money income, such as the value of home consumption of self-produced food.

Similarly, Net Cash Income is the Gross Cash Income minus all cash expenses, such as for feed, seed, fertilizer, property taxes, interest on debt, wagers, contract labor and rent to non-operator landlords. Net Farm Income, on the other hand, is the Gross Farm Income minus cash expenses and non-cash expenses, such as capital consumption and farm household expenses. Farm income usually follows the calendar January 1 through December 31. This definition helps farmers and regulators alike keep track of agribusiness income.

RELATED TERMS
  1. Agribusiness

    Agribusiness is the business sector encompassing farming and ...
  2. Federal Farm Credit System (FFCS)

    The Federal Farm Credit System (FFCS) is a network of financial ...
  3. Crop Method

    Crop method is a special accounting method available to farmers ...
  4. Farm Team

    Farm team is a baseball reference applied to businesses that ...
  5. Farm Price Index (FPI)

    The Farm Price Index (FPI) released by the U.S. Department of ...
  6. Bank For Cooperatives

    Bank for Cooperatives is a regional, privately-owned and government-sponsored ...
Related Articles
  1. Tech

    Technology: Increasing Indoor Farming's Efficiency

    Indoor farming has gone high-tech. An increasing number of investors are now sitting up and taking notice.
  2. Investing

    Top 5 Farming Stocks of 2016 (MON, DE)

    The agricultural industry is likely to experience long-term growth as the world’s population increases. These top farming stocks are poised to benefit.
  3. Investing

    Trump Team Delays Fair Practice Rules for Farmers

    The rules would ease the burden of proof small farmers face when suing meat processing giants.
  4. Investing

    There Are More Ways to Invest in Land Than You Think

    You don't have to have a huge amount of capital to invest in land. There are many other options for generating a reasonable return on investment over time.
  5. Investing

    3 ETFs to Hedge Against the Food Shortage Risk

    Learn about a possible global food shortage. Discover three exchange-traded funds that can be used to gain exposure to this investment niche.
  6. Investing

    The Industry Handbook: The Agriculture Industry (COW, LSTK)

    Learn about the major lines of businesses involved in the agriculture industry and why this industry as a whole may be the most important in the world.
  7. Insights

    The Farmer's Grip on Japanese Politics

    If you live in Tokyo, Japan's biggest city, then your vote is cheap. If you want your voice to count, move out to the countryside and buy a farm.
  8. Taxes

    Which Countries Have the Highest Taxes on High Incomes?

    These countries charge the highest taxes on high incomes.
  9. Personal Finance

    Good News! Americans Are Earning More

    After years in the doldrums, incomes are up – and not just for the 1%. Here's who's benefiting.
  10. Investing

    Gross, Operating and Net Profit Margins

    A company’s income statement includes the company’s gross, operating and net profits.
RELATED FAQS
  1. When do I need to file an IRS Schedule F form?

    If you are a farmer, your farming business may require you to file a Schedule F with the IRS. Read Answer >>
  2. What is the difference between revenue and income?

    Revenue is the total amount of income generated by the sale of goods or services related to the company's primary operations.  ... Read Answer >>
  3. How do operating income and revenue differ?

    Revenue and operating income have different deductions and credits involved in their calculations and both are essential ... Read Answer >>
Trading Center