How Do I File Farm Partnership Taxes?

Report Your K-1 Earnings on Form 1040

There are two separate tax filings required for a farm partnership. One is an informational return filed on Schedule F on behalf of the entity. This will include a form K-1 for each partner. The other is a filing by each individual member of the partnership.

Entity Filing

Depreciate Buildings and Equipment

Gather all sales and expense records for the farm partnership. List sales of livestock, crops, or other production (even rental income) on Part 1 of the Schedule F. Part 2 allows you to list expenses of the entity. Be sure to include everything from off-road fuel to fertilizer and animal vet expenses. Subtract the expenses from the sales to determine a profit or loss for the entity.

Individual Filing

Since the farm is a partnership, the responsibility for paying taxes or (in the instance of losses) the reporting of the loss, is not the responsibility of the entity. This return is for information only. The partnership is what is deemed a "pass-through" entity. This means each partner is responsible for his/her own portion of the gains or losses. The proportional share of each partner's responsibility is reported on a form K-1 individually. These are included with the farm filing while an individual copy of the K-1 is sent to each named partner.

Help For Farmers

Bookkeeping saves time and builds accuracy

The entity or the individual partners may be responsible for other taxes such as self-employment tax or estimated tax. A CPA, versed in agricultural entities, can be a tremendous help in securing all eligible deductions and timely filing all appropriate forms. Having a good bookkeeping system will enhance accuracy and save time whether you prepare it yourself or employ a tax professional.

References

• IRS Publication 225

Resources

• IRS Publication 225
• Partnership Information
• Publication 541 (04/2008), Partnerships