Pub 225

When it comes to taxes, farmers have a lot of specialized provisions that apply. As a tax preparer, it’s important for you to understand how these provisions affect your client. Publication 225, Pub 225 for short, is a great resource for you and your clients. It explains in somewhat technical language how federal taxes apply to farming operations. Pub 225 explains Federal taxes that apply to farmers. It explains the basic concepts of the tax law and gives examples. The explanations in this publication are based on the Internal Revenue Service’s interpretation of laws enacted by Congress and Treasury regulations. Sometimes a court decision may differ with the Service’s interpretation of the law. This publication will continue to present the Service’s interpretation until a court decision changes the law or the Service issues new guidance.

You should use this publication in conjunction with other IRS publications and with the advice of a qualified tax advisor. The information in this publication doesn’t address every situation a farmer might face. It focuses on those situations most likely to affect most farmers. You must also keep complete records of all your income and expenses. These records must be kept for three years from the date you filed your return or paid tax, whichever is later.

What Does Publication 225 Cover?

When it comes to taxes, farmers have a lot of specialized provisions that apply. As a tax preparer, it’s important for you to understand how these provisions affect your client. Publication 225 is a great resource for you and your clients. For example, one of the main requirements for being considered a farmer is that two-thirds of your income must come from farming activities. If your client has a side job or another business that generates income, they need to work with you to separate their farm activity.

You may also be able to claim a deduction for reasonable wages paid to laborers who perform farm duties. However, these laborers must be independent contractors and not employees of your client. If they are employees, then you must withhold Social Security and Medicare taxes from their wages. It is also important to know which records your client should keep and how long they must be kept. Some records must be kept for three years, while others should be kept longer. Publication 225 explains these record-keeping requirements and includes a worksheet that you can use to determine which records you should keep and for how long.

While Publication 225 is somewhat technical, it is an excellent resource for farmers and tax professionals. The book references many other IRS tax publications and provides explanations of how various tax laws apply to farming. A thorough review of this publication can be an excellent preparatory step before a farmer’s appointment with their tax professional. This is especially true for those preparing to file their 2022 tax return.