Some farms offer pension plans, SIMPLE plans, or contributions to an employee’s IRA as a retirement benefit to their employees. These farmers report these expenses as a deduction on Line 23, Schedule F.
Example 1. Jim operates a large dairy farm as a single member LLC, which uses Schedule F to report farm income and expenses. Employees are eligible to participate in a retirement plan, and the LLC contributes up to $3,000 per employee as a matching contribution. This year, the farm paid $25,000 in matching contributions as part of the employee retirement plan. Jim reports this expense on Line 23, Schedule F.
Example 2. Rosa contributes to her employee’s individual retirement annuities which she funds at a 100% level. This year she contributed $2,000 for each of her five employees. She uses Line 23, Schedule F to deduct this expense.
Additional filing obligations
Farmers providing retirement benefits to their employees have a responsibility and obligation to file a report with IRS using one of the following forms.
- Form 5500-SF for small plans (generally for employers with less than 100 employees)
- Form 5500 for plans which do not meet the requirements of the forms listed above.
Self-employed Farmer’s contributions
If the farmer as a self-employed individual also participated in the retirement plan; these contributions are reported on Schedule 1 (Form 1040), Line 15, not on Schedule F. Thus, the farmer’s deduction is against income tax but not self-employment tax. If it is a solo plan, the farmer would also file Form 5500-EZ for one-participant retirement plans.
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.