Tax Question

[2manyrocks]

A good many farmers couldn't afford to farm without a good paying job elsewhere.

 

[ericm979]

Doesn't @ericm979 make cider?

We do! But only on a hobby basis. We looked into doing it commercially, just out of curiosity, and were quickly scared off by the alcoholic beverage control board and commercial kitchen/food production requirements. Between startup costs and paperwork it looked like a lot of effort and money.

I think there's at least one cider company in Sonoma (we stopped at their tasting room a while back) and given it's rise in popularity in the last decade there's probably more. And more who are close enough to be able to use the apples.

I'd assume that in this case the contractor would be plugged in to the market and would know who is buying apples. But maybe it's worth checking around.
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[two_bit_score]

I am no tax professional. But I question why the contractor is giving you a 1099?

1099's are for services in excess of $600.

I think his 'services' are pulling the stumps and cleaning up the place. But I think your question is one the IRS may ask first.

 

[two_bit_score]

A good many farmers couldn't afford to farm without a good paying job elsewhere.

Or a wife with one.

 

[California]

Re 1099, the one for 2023 is the first I've received. He checked 'rent' so it's reported to IRS that way.

In prior years I logged his annual check as sale of product on the Schedule F.

Then this year, HR Block pc software refuses to take a 1099 on Schedule F, it went to Miscellaneous Income instead.

Maybe those cow sales generating a 1099 are the model for this. Categorizing income that way, avoids the self-employment taxes that are due from someone where farming is their occupation.

The more I look at all this ... This may be the end of over a century that this was a productive orchard.

 

[two_bit_score]

The more I look at all this ... This may be the end of over a century that this was a productive orchard.

I'm sorry to hear that. Sounds like the government bureaucracy and tax issues finished you off. That is sad.

 

[ultrarunner]

Seeing a lot of this in Northern California where the effort required makes it easy to shutter the doors that have been open decades or longer.

The complexities of a business today can be enormous...

I think of a friend trying to open a little bakery in SF... she is a very experienced Baker with a tremendous offering but the web if overlapping regs and delays with cost overruns and no end in sight has turned her dream a nightmare.

 

[LD1]

I think his 'services' are pulling the stumps and cleaning up the place. But I think your question is one the IRS may ask first.

Hence my confusion.

A contractor renting an orchard and harvesting apples is paying the property owner....to pull stumps and clean up their own property?

 

[LD1]

Re 1099, the one for 2023 is the first I've received. He checked 'rent' so it's reported to IRS that way.

In prior years I logged his annual check as sale of product on the Schedule F.

Then this year, HR Block pc software refuses to take a 1099 on Schedule F, it went to Miscellaneous Income instead.

Maybe those cow sales generating a 1099 are the model for this. Categorizing income that way, avoids the self-employment taxes that are due from someone where farming is their occupation.

The more I look at all this ... This may be the end of over a century that this was a productive orchard.

So if the you or the IRS declares it a hobby that looses money......what to do with the 1099?

Kinda a catch 22. You get a 1099 and they want you to claim income....yet show that it looses money. Seems they only want you to claim it if it's profitable so they can cash in and not the other way around.

So what happens if next year you declare it a hobby and DON'T claim the 1099. I think that would get you audited quicker than showing a loss

 

[fishheadbob]

You enter the 1099 on a 1040 where it's taxed as income. The farm has only expenses so shows a loss. Example: the farm has expenses of $1000 entered on a schedule F. Net result is minus $1000. The 1099 shows a payment of $1500, enter it on the 1040. Overall the farm made $500, just not on the schedule F. The IRS can understand this.
I'm a Christmas Tree grower. Many tree growers can show trees sold as a capital gain (Timber sales). Their schedule F constantly shows a loss since all sales are reported as capital gains. Never heard of it being an issue with the IRS. Why report it as a capital gain? Lower tax rates, and no self employment tax.
After thinking about this I get the feeling that the OP knows how to grow apples. While he worked for government as an auditor and knows how government thinks (scary) he might be wise to bite the bullet one year and hire a CPA with agricultural experience. Some of those guys are very knowledgeable about the tax code and know more of the ins and outs than the best farmers. It's what they do. I was in a situation where we had an LLC, a subchapter S, a limited partnership, and I had a timber sale. all in one year. Way over my head. I learned a great deal. While the CPA wasn't cheap, he saved us a bundle and the learning I received was "free tuition".