Are you a cash or accrual farmer?
There are a few ways to report income and expenses from your farming activities.
- Cash method
You report harvest revenue in the year cash is received from buyers and deduct all farming expenses in the year you pay them.
- Accrual method
Essentially the opposite of the cash method, in that you record farming income in the year you finalize a sale—even if you don't get paid until the following year—and deduct costs in the year you become liable for payment, regardless of when you actually pay them.
- Crop method
You wait until the year you sell your crops to report the related income and expenses on Schedule F, if you obtain IRS approval first.