Tax Considerations for 4-H or FFA Activities

December 17, 2019
Kristine A. Tidgren

We have received several recent questions about tax issues associated with 4-H or FFA activities. This post provides a general review of key requirements to consider.

When children participate in 4-H or FFA, net income received from sales or prizes related to their projects is potentially taxable. Whether tax will be due on this income depends upon the amount and type of overall income the child receives throughout the tax year.

When Must a Dependent Child File a Return?

For the 2019 tax year, a child who is a dependent on someone else’s return must file a tax return (or in some cases report the income on the parent’s return) if the child:

  • had only unearned income (such as dividends or capital gain or 4-H premiums) and it was more than $1,100;
  • had only earned income (wages or income from a trade or business, such as a livestock operation) and the earned income was over $12,200; or
  • had both earned and unearned income and gross income was more than the greater of:
    • $1,100, or
    • earned income (up to $12,200) plus $350.

How is 4-H or FFA Income Reported?

If the child must report income, the reporting method depends upon the type of income he or she received. The overall purpose of the child’s activity determines the category of income received from an FFA or 4-H project. If the activity was conducted primarily for educational purposes and not for profit, and it was completed under the rules and economic restrictions of the sponsoring 4-H or FFA organization, it does not generate “trade or business” income. In this typical case, the net income is reported as “Other income” on Schedule 1 (Form 1040 or 1040-SR), line 8, and it is not subject to self-employment tax. If the project is part of a larger activity that the child is conducting on a regular and continuous basis for profit (such as a livestock operation), it may generate trade or business income subject to self-employment tax. Farming income and expenses are reported on Form 1040, Schedule F.

When is a Form 1099-MISC Required?

FFA and 4-H members may or may not receive a Form 1099-MISC reporting the income they receive from their activities. Even if they do not receive a Form 1099-MISC, the income must be reported (regardless of amount) if a tax return is otherwise required to be filed.

Income generated from sales of agricultural commodities, including livestock, is generally not reportable on a Form 1099-MISC. Therefore, if a buyer purchases an animal at a fair market value (FMV) price and pays the money to the 4-H member, no Form 1099-MISC would be required. A Form 1099-MISC must be sent, however, to any person who receives a "premium" or "prize" valued at $600 or more. With a 4-H or FFA sale, the proceeds from a commodity sale may constitute a premium or a prize, rather than an actual payment for the commodity purchased. The amount of money paid may exceed the FMV of the animal or the money may be paid by an entity or person other than the recipient of the animal. In these cases, the money paid to the member is a premium or prize and the payer of the money must send the member and the IRS a Form 1099-MISC (if the value of premiums or prizes paid to that recipient is $600 or more for the year).

4-H or FFA members must cooperate with their organizations to provide W-9 Forms, as requested. If tax ID numbers are not provided, when requested, the money will be subject to additional withholding, and the IRS could impose fines on the member.

CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.

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