1099-G

[Dan]

Question:  If you have a 1099-G (U.S. Department of Agriculture form) and in the past have put all information from that 1099-G on the line which says Agriculture Program Payments which is 4a and 4b on the 2020 Schedule F Form, how do you enter in 2021 some of that info on form 4835?

Example of what is on the 1099-G:

1.  Coronavirus Food Assistance

2.  CRP payment 

3.  PLC payment

At first, I would put the total 1099-G payment on Schedule F.  The farmer materially participates with 1 and 2 above but not with number 3.  The question is: how and where to enter number 3 on form 4835?  The PLC payment received is the landlord's share of the 2021 payment.

 

[DANRVAN]

Sounds like  your client is reporting on both 4835 and F and your concern is a CP 2000.  I don't know if the IRS system will net and match the amounts from both 4835 and F to the 1099-G.  To be safe, you can enter the full amount on line 3 of F and then back out the amount which is reported on line 3 of form 4835.

Or, if your client is at low risk for heart failure, you can reported the exact amounts on each form, inform you client of a potential IRS letter and see what happens.

[Dan]

Would this be the correct way to do it? (Number 3 Above)

1. On Schedule F, the PLC payment is put on Line 8 (other income) as a minus number.

2.  On Form 4835, the PLC payment is put on line 6 (other income) as a positive number.

 

[Dan]

I have a lot of questions about this.  Do you have to put CRP payments on Schedule F?  Publication 225, page 11 says, "Under CRP, if you own or operate highly erodible or specified cropland, you may enter into a long-term contract with the USDA.  You must include the annual rental payments and any one-time incentive payment you receive under the program on the appropriate lines of Schedule F."  And yet a tax return I saw had CRP payments on the 4835 Form.  

I also have questions about what I said in my previous entry.

[DANRVAN]

9 hours ago, Dan said:

And yet a tax return I saw had CRP payments on the 4835 Form.  

The IRS has taken the position that all CRP is subject to SE tax (except for taxpayers who also receive SS income).  However,  there is some case law that rules in the favor of non active farmers, specifically Morehouse in the 8th circuit.  

For active farmers, case law, including Wuebker, has held that for active farmers CPR payments are subject to SE tax.

The 2008 farm bill brought into law the provision that any taxpayer who receives social security in not subject to SE tax on their CRP payments.

So for non-active farmers there is some gray area which the IRS will challenge.

 

[DANRVAN]

On 12/18/2021 at 11:41 AM, Dan said:

Would this be the correct way to do it? (Number 3 Above)

1. On Schedule F, the PLC payment is put on Line 8 (other income) as a minus number.

2.  On Form 4835, the PLC payment is put on line 6 (other income) as a positive number.

 

That method will result in the correct amount of income reported on either schedule. 

Another method is to put the negative number under other deductions on Schedule F.  However that would overstate the amount of gross farm income which might be used for other purposes on the tax return.

Depending on the client, I would probably inform them of  a possible CP 2000 and see how it matches up out of curiosity.

[TAXMAN]

Excuse me for sounding confused. TP a full time farmer receiving ss benefits reports on Sch f the crp payments and excludes them on Schedule SE. I am reviewing a return and do not see that this took place. They are on the F and tp has considerable SE income from the F(positive#)

[DANRVAN]

7 hours ago, TAXMAN said:

. I am reviewing a return and do not see that this took place.

It is supposed to be subtracted on line 1(b) of SE.

[Dan]

I know you can subtract CRP payments from Schedule SE if you also receive Social Security Payments.  You can subtract CRP payments on line 1(b) as you mentioned.  My question in this blog is concerning PLC (price loss coverage) payments that should go on form 4835.  These payments came as a result of farmer turning over land to a tenant.  The farmer still materially participates in the CRP but does not materially participate in regard to PLC.

One blog I read says:  "Many times farmers will receive a Form 1099-G that reports information that the IRS computers expect to see on a certain line on Schedule F.  Many tax preparers assume that they are required to report the income on those lines and that is the end of the process.  The correct procedure is to report this income on those appropriate lines so the IRS computer will match it up properly and then usually adjust out the correct amount as a negative item on the other income line on Schedule F."  Blog by Paul Neiffer, CPA

Is there anywhere in IRS publications that say this?  Thanks for your responses.

[DANRVAN]

15 hours ago, Dan said:

s there anywhere in IRS publications that say this?

Not that I know of.  It is a standard procedure to prevent a cp 2000 while preparing an accurate tax return.

 

15 hours ago, Dan said:

PLC (price loss coverage) payments that should go on form 4835.

Sounds like he receiving a crop share so the payments would go on 4835.