Agricultural Program Payments
You must include in income most government payments, such as those for approved conservation practices, livestock indemnity payments, or livestock forage disaster payments whether you receive them in cash, materials, services, or commodity certificates. However, you can exclude from income some payments you receive under certain cost-sharing conservation programs if there is a corresponding reduction in basis of a related improvement.
Report the agricultural program payment on the Schedule F, Part I. Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Commodity Credit Corporation (CCC) loan. However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. Claim the deduction on Schedule F, Part II, for the year of repayment or reduction.
Commodity Credit Corporation (CCC) Loans
Generally, you don’t report loans you receive as income. However, if you pledge part or all of your production to secure a CCC loan, you can treat the loan as if it were a sale of the crop and report the loan proceeds as income in the year you receive them. You don’t need approval from the IRS to adopt this method of reporting CCC loans.
Once you report a CCC loan as income for the year received, you must generally report all CCC loans in that year and later years in the same way. However, you can obtain for your tax year an automatic consent to change your method of accounting for loans received from the CCC, from including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan.
**Conservation Reserve Program (CRP)
Under the CRP, if you own or operate highly erodible or other specified cropland, you may enter into a long-term contract with the USDA, agreeing to convert to a less intensive use of that cropland. 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. Cost-share payments you receive may qualify for the cost-sharing exclusion. CRP payments are reported to you on Form 1099-G.
TAX TIP **Individuals who are receiving social security retirement or disability benefits may exclude CRP payments when calculating self-employment tax.