Schedule F vs Form 4835

[Kristi13]

My mom is a retired school teacher who farms. A tax preparer told her she should move all of the items she previously reported on Schedule F to Form 4835, even though she does not lease the land or livestock to anyone. The tax preparer said to do this because my mom has never been nor would ever be eligible for social security benefits, given her school district's pension structure. Is this switch (from Schedule F to Form 4835) accepted under these circumstances?

[Mike9241 · Accepted solution]

Qualification for Form 4835

The IRS considers "material participation" to be the determining factor as to which farm income tax form you should file. If you're a traditional farmer who raises crops or livestock, you're considered a self-employed business person and you would file using Schedule F, Profit or Loss From Farming.

However, if you merely rent out your land to farmers and do not materially participate in the labor or management of the farming process yourself, you are considered a landowner, not a farmer, according to the IRS. Form 4835 is the way for non-participating farmland owners to report their farm income and expenses.

based on the info that was provided Schedule F is the appropriate form.     

the fact that because she may never collect social security because of her pension plan, not sure this is true - she should contact the Social Security Adm to verify her status, has no bearing on the proper form to use.  Improperly avoiding paying self-employment taxes when owed can result in substantial penalties. 

you can also go to iRS website and review the instructions for the form/schedule and PUB 225 

[Kristi13]

Thank you. This is very helpful.

[thmilar]

And here is my question related to this post, if I may.

The land (farm) is owned 100%. The owner makes all decisions with regards to crops and selling harvested crops, plus hires the contractors who do the planting, fertilizing, harvesting, and transporting to the elevators. The agreement is contracted for payments to contractor, and expenses (seeds, etc) are also paid by the farm owner. This case seems to be in the middle of the one cited here. So active participation is yes. But material participation is more difficult, since the owner materially manages, but hires out the operations to a contractor. Any reference on how to research this?

[RobertB4444]

I think you're kind of on the fence here and you could use whichever form you would prefer.  I could easily make the argument for material participation here.  But I could also make the argument that this is just an investment.  And you have valid arguments for both.  So pick the form that you prefer.

@thmilar 

[stevepe]

In 2025 the rules have changed.  She may ber eligible to collect social security provided she has the credits.