Schedule J Line 2a ELECTED FARM INCOME

[buffbelle]

The IRS instructions for Farm Income Averaging Schedule J Line 2a has a Tip that says "you don't have to include all of your taxable income from farming on line 2a. It may be to your advantage to include less than the entire amount, depending on how the amount you include on line 2a affects your tax bracket for current and prior 3 tax years".

How or why is it possible or legal to include less than the amount on Form 1040 line 15? Is this a red flag to the IRS?

Pat Stephens

[JohnW152 · Accepted solution]

Farming income is still reported as normal on Form 1040; it’s tax that’s calculated differently.  There's no red flag related to income.

Using Schedule J, Income Averaging for Farmers and Fishermen doesn’t affect what’s on line 15 of Form 1040.  And what’s included on Line 2a of Schedule J wouldn’t likely be the same amount as what’s on Line 15 of Form 1040.  

A farmer can qualify to calculate a lower tax by using income averaging when farm income is high in the current year, but was relatively low in any of the three prior years.  

Please see the TurboTax article What Is Schedule J: Income Averaging for Farmers and Fishermen - TurboTax Tax Tips & Videos for more information.

[Edited 3/15/2022 | 9:07 am PST]

[buffbelle]

Thank you for your reply. It helps. I understand I am normalizing the bracket percentage, it just seems odd that I can randomly pick an amount to get that the bracket lowered. 
Again, thank you. 

[mwarren-pbsah]

Do you have to do a schedule J for elected farm income? I selected not to average it on one of the pages, but now during my review it wants me to fill out a schedule J

[JohnW152]

No, you don't have to file Schedule J for farm income.  It's simply an option you have.

To remove farm income averaging in TurboTax Online:

1. If you don’t see 2022 TAXES in the left pane, scroll down and select the dropdown to the right of Other Tax Situations and select Let’s get started, Pick up where you left off, or Review/Edit. 
   • Otherwise, in the left pane, select the dropdown to the right of Federal, then select Other Tax Situations 
2. On the  Your uncommon tax situations page, scroll down and select the Show more dropdown to the right of Business Taxes and Deductions
3. Select  Start or Revisit to the right of Farm or fishing income averaging
4. Answer  No on the Farm or Fishing Income Averaging page
5. Enter all relevant information on the subsequent screens

If this doesn't appear to work, you can delete the form in TurboTax Online if you:

1. Open your return in TurboTax
2. Select Continue or Pick up where you left off
3. In the left pane, select the Tax Tools dropdown
4. Select Tools
5. In the pop-up window Tool Center, select Delete a form
6. Select Delete next to the Schedule J and follow the onscreen instructions

A farmer can qualify to calculate a lower tax by using income averaging when farm income is high in the current year, but was relatively low in any of the three prior years.  

Please see the TurboTax article What Is Schedule J: Income Averaging for Farmers and Fishermen - TurboTax Tax Tips & Videos for more information.

[Allen771]

I have turbo tax home and business.

I am finishing up my 2022 tax return after filing an extension.

I decided to try farm averaging, and after being prompted to put in taxable income and taxes paid for 2020 and 2019, my taxes owed went up $1,100.  How do I return to the non averaging amount?  I went to the screen that says "Other" and clicked "No" on the Farm Averaging, but the amount of taxes remained the same.  How do I reverse this?

Allen771