How do I enter my w2 commodity wage? On Schedule D?

[hollydog2-]

I receive a commodity wage from a farmer I worked for (received grain).  I received a W-2 with the value of the grain listed in box 1.  No other boxes are filled in.  I know it doesn't go on the wage line of the 1040 and I don't believe it goes on on a schedule F.  It has been a number of years since I have received one.  If I remember right it goes on Schedule D with the amount I sold the grain for?  And that there is no social security or medicare due on this income?  I tried to find information on the IRS website but all I kept pulling up was about the employer.  Thank you!

[Cattlerancher]

Well done answer, this is done often in the farming community----

[GeoffreyG · Accepted solution]

Actually, as a recipient of non-wage compensation (in the form of a tradable commodity) you will use your W-2 information, and also a Schedule D, but not a Schedule F (your memory is correct here).

In researching your issue, I was able to find a very helpful (free) 2-page summary sheet published by a well-known, and respected, regional CPA firm known as Eide Bailly.  Here is a link to the document that I found:

http://www.eidebailly.com/media/861914/agricultural_wages_paid_in_commodities.pdf

(All credit for the intellectual property content of that document belongs to the original authors at Eide Bailly.)

Cross-checking the information found there with what is available at the IRS, as well as other resources, as a licensed CPA myself, I am in complete agreement with the conclusions and tax treatment summarized by Eide Baily.

Basically, what you should do to report your income is this.

Create a W-2 entry in TurboTax.  Use your W-2 Box 1 figure on the wage statement you have.  Enter it in Box 1 in TurboTax (and make no other entries, unless you are in a state with its own income tax, in which case you should also fill in Boxes 15 and 16 on the W-2 entry screen).  TurboTax will ask you a few questions to make sure that you entered the W-2 as you intended to, but will let this pass without creating any program errors.

Next, you will go to the investments section of TurboTax, and make an entry for your grain sale.  Your cost basis is identical to what you reported on W-2, Box1.  Your sales proceeds are whatever you received when you sold the commodity.  This short-term capital gain (or loss) is then reported on Form 8949, which "flows" back onto Form 1040 Schedule D (TurboTax will take care of that math and create the necessary forms for you).

As a visual guide to understanding, I've also created and attached several relevant screen-capture images to the bottom of this answer; simply click the pictures to open.

Thank you for asking this important question.