Insights: Article

IRS Farm and Ranch Audits

By Ben Peeler

January 10, 2017

The Internal Revenue Service (IRS) has announced a new pilot program related to the audit of Schedule F. Schedule F is used for reporting profit or loss from a farming or ranching operation on an individual filed Form 1040.

The pilot program is scheduled to begin April 1, 2017, and will only be implemented at the Brookhaven Internal Revenue Service Center. The pilot program is expected to last for one year.

The purpose of the new IRS program is to test certain deductions being claimed on the Form 1040 Schedule F forms that are audited. The IRS wants to determine if expensing compliance is adequate or is there a lack of proper reporting that would suggest the program needs to expand to other IRS Service Centers.

Some of the Schedule F expense items to be reviewed are:
 - Prepaid Farm Expenses (supplies): Are they really deposits?
 - Fuel Expenses: Are they for the farm or personal use?
 - Mortgage Interest: Should it be an itemized deduction?
 - Repairs: Are they actually improvements?

Although the pilot program is conducted from the Brookhaven Internal Revenue Service Center, the IRS will survey returns from across the country. This presents an opportunity for clients to review their own current expensing practices and determine if any modifications should be considered.

Latest Insights

September 18, 2018
Article
As the largest tax reform legislation in the past 30 years becomes reality, it is important to stay up-to-date on planning opportunities and how reform may impact you and your business. Our Tax Reform: Practical Insights examples aim to break down…
September 18, 2018
Tool
Get ahead of tax season with the Eide Bailly Tax Planning Guide. A supplemental strategy guide to help guide year-end and make the tax laws work for you.
September 18, 2018
Article
The SCOTUS Wayfair decision has prompted a new focus on state and local tax compliance. The decision to register, report, and comply is important.
September 17, 2018
Article
When an IRS Letter 226J is received, it is important to respond timely and with accurate information to eliminate, abate or reduce IRS calculated penalties
September 17, 2018
Firm News
Tom Goekeler, partner at Eide Bailly LLP, has been named chief practice officer of the South Central region, which currently covers our Oklahoma and Texas offices.
September 17, 2018
Article
The recent US Supreme Court decision that overturned Quill in the South Dakota v Wayfair case has many states making or considering law changes related to sales tax compliance for out-of-state sellers.
September 12, 2018
Article
The Tax Cuts and Jobs Act, signed December 22, 2017, significantly impacted inbound tax planning. Non-U.S. taxpayers doing business in the U.S. will need to consider the new tax laws.
September 12, 2018
Article
Applications have made a huge impact on our lives, allowing us to keep track of the complexities of our day-to-day and save for our futures. But it’s important to understand where we are laying our trust.
September 12, 2018
Article
The following steps outline key considerations for businesses as they work to comply with the new sales and use tax rules.