6/ a biz loss of $19,900. You find that at the bottom of your form F, and transfer it onto your 1040. Let's say you also earn $100k as
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Replying to @MorlockP
7/ a software engineer. So now your income looks like + $100k (sftwr) - $19,900 (farming) = $80,100 (total income)
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Replying to @MorlockP
8/ and you only pay income tax on that $80,100, not the full $100k you made. You can do this every year. HOWEVER...
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Replying to @MorlockP
9/ You can't farm as a hobby and "lose" $30k/yr forever and ever. This may be your first rodeo, but it's no the IRS's.
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Replying to @MorlockP
10/ IRS had a term for this decades ago. A hobby "loss" (word "loss" in air quotes). Giving rise to "the hobby loss rule".
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Replying to @MorlockP
11/ I am not an accountant, but my understanding is that (a) you can only have losses 3 out of 7 years (b) you can't "fudge" with $5 profit
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Replying to @MorlockP
12/ ...bc that's the obvious hack, right? * lose $30k * lose $30k * lose $30k * sell 1 bale of hay for $5 ; no expenses * lose $30k ...
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Replying to @MorlockP
13/ I'm sure that the IRS also has good info on what things cost, so I'd never claim a Kubota cost $100k or a shovel cost $500.
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Replying to @MorlockP
14/ To be super-safe, I keep ALL receipts, and when I fill in form F I reference * date * vendor * receipt # * EXACT total
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Replying to @MorlockP
15/ if I'm ever audited, I've got a folder w all of this. The very very worst case is IRS says "oh, XYZ isn't actually allowed".
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16/ e.g. "Oh, post hole diggers are deductable, but shovels aren't". And I'll respond. "Ah, I see, my bad. Here's the extra $100 I ower you"
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Replying to @MorlockP
17/ When dealing w the IRS there is a WORLD of difference between "reasonable disagreements over interpretation" and FRAUD.
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Replying to @MorlockP
18/ ...so I don't invent employees, expenses, or anything else. KEEP ALL RECEIPTS. EXAGGERATE NOTHING.
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