Any potential problem (such as being audited) with IRS if we stop filing Schedule F for our small farm enterprise?

[lprmvr]

Are there any issues stopping filing Schedule F? Do we have to state a reason for stopping? What are audit chances? How far back would they go? (claw back the $25K?) If we stop filing for 2023, can we resume filing Schedule F in the future years if the situation turns for the better? Or is there any issue with resuming?

We’ve been trying to make something out of our property (zoned agriculture) - raising chickens, rabbits, vegetable starts, providing grafting service, etc.

So far, we showed a very small profit (in low thousands) for 3 years and losses in 2 years including a very large loss renting equipment ($25K) to do brush clearing, drainage and terracing. But we had losses due to very heavy rains and my husband’s health took a big downturn. Our other income right now is SS and retirement funds.

We filed for extension for 2023 tax and we are preparing to file by October 15. Any input is appreciated.

[tagteam]

Are you discontinuing operations completely?

Do you have equipment or buildings that you are depreciating (cost recovery)?

There is no need to notify the IRS or otherwise include any kind of a statement.

Your chances of audit will likely neither increase not decrease.

The standard period of limitations (SOL), absent unusual circumstances, is three years from the due date of the return or the date the return is filed, whichever is later.

[lprmvr]

Thank you for the quick reply. So we can just eliminate Schedule F from the tax return? I don't think we have equipment we're depreciating but I have to check. Mileage of a pickup truck was used as deductible expense. 

Do you know if there is any problem if we decided to file Schedule F again in the future?

What is the standard period of limitations (SOL)? Does that mean if we filed the return with 25K loss in 2019 return we are clear now, after more than 3 years?

[tagteam]

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@lprmvr wrote:

Does that mean if we filed the return with 25K loss in 2019 return we are clear now, after more than 3 years?

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Yes.

If you filed your 2019 by the due date (or had an extension and filed in October), then the examination period has lapsed, again absent unusual circumstances such as fraud, substantial understatement, etc., which most likely do not apply to you.

[tagteam]

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@lprmvr wrote:

Do you know if there is any problem if we decided to file Schedule F again in the future?

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There is no problem with doing so. 

If you had equipment or buildings, then you would have to adjust the basis of that property when you started operations in the future. Obviously, that does not apply in your case.