Farmers sometimes hire contractors to complete work they cannot do themselves. In some places, this may be referred to as “machine work.” Farmers report the expense for a custom hire on Line 13 of the Schedule F. Expenses a farmer incurs to rent equipment he operates himself are not reported on this line. Line 13 applies only if the labor to operate and do the job comes along with the machine or equipment.
Note: If the farmer pays $600 or more to an unincorporated business for custom hire or machine work, an IRS Form 1099-NEC must be issued for custom hire or machine work.
Example 1. Sydney hires a custom harvest crew to combine her wheat crop. Even though Sydney has a combine, she cannot cover all of the planted acres in a timely manner. Sydney pays the custom harvest crew $25,000 for their services. This expense is reported on Line 13, Schedule F, and if the contractor is not incorporated, Sydney must issue a 1099-NEC.
Example 2. Cyrus built a machine shed this year. He had a restroom installed to accommodate his employees. A plumbing contractor was engaged to install the plumbing fixtures and connect the waste lines into the septic system. Additionally, Cyrus hired an electrician to wire the machine shed with lights and various electrical outlets for his shop tools. Cyrus paid $2,500 to the independent plumber and $5,000 to the electrician. Both contractors were unincorporated. Line 13 of Schedule F is the place to report and deduct the $7,500 of custom hire work. These two payments require the issuance of IRS Form 1099-NEC.
The Center for Agricultural Law and Taxation is a partner of the National Agricultural Law Center (NALC) at the University of Arkansas System Division of Agriculture, which serves as the nation’s leading source of agricultural and food law research and information. This material is provided as part of that partnership and is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.