# tax break for beeks



## jjgbee (Oct 12, 2006)

*Schedule F, for Farm*

Definately file a section F along with your personal 1040. Get a blank IRS Section F form. It is very self explanatory. No buss license is needed to file any IRS form. Keep a log of your daily activity in your bees if it entails milage. A daily log is very valuable anyway. Keep weather records ect. You will find it a valuable learning tool in the future. If you need a truck to keep your bees, write the whole cost off. Insurance,fuel,license,total cost of buying vehicle, intrest ect. Liability insurance for bee operations is required by many agencies in Cal. another deduction while protecting yourself from lawsuits.


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## Michael Palmer (Dec 29, 2006)

Do you claim the income from your 55 colonies? If so, why wouldn't you claim the expenses?


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## Sarge (Jun 26, 2006)

Go past the post office or library and get a copy of the small business handbook, the instructions for farm profit and loss, and the forms that go with them. look them over and you will get an idea what is up.
Starting now keep every receipt you get no matter what. You need to get in the habit and that is easier than sorting as you go. And ask for receipts for everything as well.


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## Templar Ben (Feb 25, 2009)

You can write of expenses no matter what. The question is how do you claim the income and where the expenses go. There are two views for an enterprise that makes money. It is either a hobby or a business. (Technically there are others such but I don't want to go too detailed as hobby vs business are where you would be most likely.)

If it is a hobby then you report the income as "Other Income" and all expenses (to the extent of income) are deducted on your Schedule A. The biggest downsides on this are that you can't carry a loss forward and your AGI will be higher which minimizes your ability to claim work related expense (2% AGI floor) and medical expense (7.5% AGI floor). 

If it is a business then you will use a Schedule F (Farm Income) and only the profit (or loss) goes onto your 1040. That means you take all income minus all expenses (including paper losses such as depreciation) and the result goes onto the long form so it doesn't touch your Schedule A. That means you can claim expenses even if you don't itemize which is not possible with a hobby.

To be a business there are 9 tests that the IRS use. You will hear people say you have to make a profit three years out of every five but that is not accurate. If you make a profit three years out of a given five then you have the presumption of the IRS that you are a business and they won't check beyond that to see if you are in fact a hobby. In short 3/5 can make you a business but not having 3/5 does not automatically make you a hobby. It took Google 9 years to turn a profit and the government understands that. 

The nine tests are

1. Manner in which the taxpayer carries on the activity: Do you keep accurate records? Do you operate like successful businesses in your industry? In my experience getting an EIN and a DBA will greatly help the IRS in passing you on this one. It is also best to open a separate account for financial transactions. 

2. Expertise of taxpayer or his advisors: Did you get training? Are you asking the right people for advice? Having a business plan where you say what your expected market will be will help in an audit.

3. Time and effort expended by taxpayer in the activity: Just because it is part time doesn't make it a hobby but it is best to log ALL business related activity somewhere. 

4. Expectation that assets used in activity may appreciate in value: You see this more with Real Estate or selling collectibles.

5. Success of taxpayer in similar or dissimilar activities: If you have successful run a different business that will greatly help.

6. History of income and losses with respect to the activity: If you run losses as a start up then that is understood. If you run profit and due to weather or some other factor you start running a loss that is understood as well. 

7. Amount of occasional profits, if any, earned: If you barely turn a profit it can be a sign of cooking the books, generally speaking the IRS doesn't like that.

8. Financial status of taxpayer: If this is your only source of income or if you have little outside resources to call upon then this is a sign that you have a profit motive.

9. Elements of personal pleasure or recreation: It is not that you can't love what you do but if you have something that is all fun and games and you never make money then that looks a bit shady.

There isn't a test of must get 5 out of 9 or test 7 counts double. They look at everything together.

That is painted with very broad strokes. The IRS Pub you want to get is Pub 225. Just ring up the IRS and they will send you one free.

Hope that helps.


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## danameric (Mar 11, 2007)

You can also claim a portion of your phone bill if you use it for your agricultural buisness. Bees are livestock so if you live near your hives and use your utilities. The portions that you use are deductible.


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## Benton2569 (Feb 26, 2007)

JJ - are you kidding? You can write off your truck...even as a hobbyist?? What are the catches or requirements. It sounds too easy.

thx


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## Templar Ben (Feb 25, 2009)

Benton2569 said:


> JJ - are you kidding? You can write off your truck...even as a hobbyist?? What are the catches or requirements. It sounds too easy.
> 
> thx


There are a couple of ways to handle your truck. The method that he was referring to is known as "Standard Mileage". The alternative is "Actual Expenses".

For Standard Mileage, you record all miles driven that are ordinary and necessary. Things like driving to get supplies, driving to your hives, travel to training, or travel to a work symposium. The IRS will publish the Standard Mileage Rate and you get that much as a deduction per mile driven. It was 50.5 cents per mile as of Jan 1, 2008 went to 58.5 cents on July 1, 2008 and dropped to 55 cents per mile on Jan 1, 2009. 

For Actual Expenses, you will total depreciation, registration and licenses, gas, oil, tires, repair, insurance, tolls, and parking and then multiply the total by the percentage of the vehicle use that was business related. 

There are also business use of a home expenses that you can claim.


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## iwombat (Feb 3, 2009)

I really need to put a hive on an island so I can deduct my boat.


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## Templar Ben (Feb 25, 2009)

iwombat said:


> I really need to put a hive on an island so I can deduct my boat.


Good luck with that.


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## USCBeeMan (Feb 7, 2009)

Be careful in what you deduct. Don't be greedy or stupid. I retired from the IRS the first of 2008. Personally, how you do your taxes is your business. I was in IT all my life so I had nothing to do with audits or collection.

Take all the deductions you can. But if you are not sure, error on the side of caution. I plan on taking every deduction I can for my beekeeping business. I will have a loss as will anyone in beekeeping the first year. I kept my receipts for all of the bags of sugar I purchased. I have my mileage written down by the day and what I did. Heck, you need to write down what you did anyway.

As far as using mileage or actual that's an individual's decision. But one thing you need to know. If you start out with actual expenses you must continue using actual expenses for every year going forward. If you start out using mileage, you can change to acutal in a future year.

BTW, once employed by the IRS in any capacity, you are flagged in the system as an IRS employee. That's for the rest of your life. So every year I get an audit by the system. I for one, don't want to have to deal with an audit.

BTW, I have found over the years that most IRS employees were the hardest working group of people I have been around. They also are not out to get you. They are just doing their jobs. If you treat them with some respect and kindness, I assure you that in 99% of the time you will get the same in return. They have to pay taxes just like you and they don't like paying any more than they have to just like you.


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## Benton2569 (Feb 26, 2007)

USC, I was a bank and insurance auditor for many years (not for the IRS) so I understand reasonability. 

This is the very first time that I have ever heard of being able to deduct anything. Since I just bought equipment (and have more planned) and recently began moving hives to different yards I am very interested. Trying to find out more so I do the right thing - figuring this only applies to the "big guys".


I got audited by the IRS a few years ago and they saved me $2,300 because of a mistake on my part. I love IRS!


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## Benton2569 (Feb 26, 2007)

Over how many years do you depreciate your equiptment (hives, extractors etc)? Vehicles are usually 5 years and builidings are in the 30 yr range but dont know what to use for woodenware.


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## Templar Ben (Feb 25, 2009)

Benton2569 said:


> Over how many years do you depreciate your equiptment (hives, extractors etc)? Vehicles are usually 5 years and builidings are in the 30 yr range but dont know what to use for woodenware.


Well with Section 179 you deduct it in the year of purchase. You can deduct up to $250,000 (there is a phase out if you purchase over $800,000 in a year). This applies to personal property (so no real estate) and there are different rules for vehicle.

List the property on Form 4562 and that will carry over to line 13 on your Schedule C or line 16 on your Schedule F.


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## Pooh (Mar 8, 2007)

Templar Ben said:


> Well with Section 179 you deduct it in the year of purchase. You can deduct up to $250,000 (there is a phase out if you purchase over $800,000 in a year). This applies to personal property (so no real estate) and there are different rules for vehicle.
> 
> List the property on Form 4562 and that will carry over to line 13 on your Schedule C or line 16 on your Schedule F.


Can't it also be deducted out over five years? Also, when talking to someone they said that I need to file a schedule F and C. I thought everything would be on the schedule F??


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## mgmoore7 (Jul 6, 2007)

I don't know all the details but be careful with deducting items like phone, electricity, office space in your home, etc. This is because, when you sell, the part of the home that was used for business becomes taxable for any profit made.

I did this while running a Internet business and then had to pay taxes when I sold the house. I found that the savings I received and the hassle of deducting the office space, % of electricity, etc was not worth it. I believe I lost a good amount of money on that.


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## USCBeeMan (Feb 7, 2009)

My wife was deducting part of the house (a room that was her office) when we got married in 2000. I quickly had her stop the practice of using part of your home for a deduction. It's not worth the tax break. Your time spent calculating and then having to add value back to your home and pay taxes on it when sold is not fun.

Taking off a portion of the elec, phone, cell, Internet service is different. They have nothing to do with your home. Rather they have to do with business vs personal use of the same utility.


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## wildbranch2007 (Dec 3, 2008)

Pooh said:


> Also, when talking to someone they said that I need to file a schedule F and C. I thought everything would be on the schedule F??


I use schedule c checked with the irs as I would prefer to use schedule f. Explained that I have bees etc, they asked if I lived on a farm, or rented the land that the hives were on. answer was no. there answer was that you can't use schedule f. Now that the stimulus package has bees as livestock, I'm going to check again, if I own livestock that makes me a farmer?? i think.

mike


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## Templar Ben (Feb 25, 2009)

Pooh said:


> Can't it also be deducted out over five years? Also, when talking to someone they said that I need to file a schedule F and C. I thought everything would be on the schedule F??


Do you have a reason for not wanting to expense it all in the same year? You can take normal depreciation but that is rarely as beneficial as today dollars are worth more than tomorrow dollars (inflation and all). It depends on if you run a farm that happens to be a business or run a business that happens to involve farming. You get the same thing with real estate where you can put it on a schedule E or a schedule C depending on how it is run. 

As to deducting home office use, again it is generally worth taking the money now even if it results in tax later due to inflation but that is for you to decide as it is your money.

Why would you want a Schedule F instead of a Schedule C? Are you part of a co-op? Do you get CCC loans? Do you have conservation expenses, fertilizers, or vet bills? Are you not on a cash basis? See the government could have one form for everything but they break it out the way they do because they prefer to have things with similar expenses together because it makes it easier to audit.


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## Pooh (Mar 8, 2007)

I would like the longer write off as my profits were not large this year. Is 5 years the depreciation fro bee equipment? Am I correct in understanding that I need to do either C or F but not both? Thanks


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## MichaelW (Jun 1, 2005)

The IRS of course has the final say, but to say the beekeeping is anything other then farming is absolutely absurd. Some highlights from my schedule F include

Sales of livestock, produce, grains , and other products you raised
Agriculture program payments
Other income

Car and truck expenses
Depreciation and section 179
Feed
Insurance
Repairs and maintenance
supplies
taxes
Veterinary, breeding, and medicine
other - website
other - trade journals

I looked at schedule C and the income and expense lines on Schedule F are much more suited for beekeeping(a.k.a. farming).

Someone also mentioned filing taxes sounds too good to be true. Its not. Its hard, long, drudgery. I hate it, hate it, hate it. But, like most work, it has at least a few rewards. Such as you know if your business is sound or not. I know I though I was doing a lot better till I accounted for everything. And I'm not breaking the law by not reporting income. And I can offset taxes on that income by showing how much I put back into the business.


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## MichaelW (Jun 1, 2005)

Pooh, I understand bee equipment to be 7 years, and you only need to to do F not C.
But I'm no accountant. I'm just trying to follow the rules.

Note that once you break it down for 7 years, you have to spend a lot to 
make it worth keeping up with that long. Fill out the table completely and keep it with your
records to refer to each year. That will save some headache, unless of course 
you loose the table or your previous records.

For the last couple of years, each year I regret doing depreciation instead 
of sec. 179 for bee equipment and then do it again for the present year. Its 
a long term commitment and probably is not worth the trouble. But since I 
already started, whats one more year?


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## Templar Ben (Feb 25, 2009)

Pooh said:


> I would like the longer write off as my profits were not large this year. Is 5 years the depreciation fro bee equipment? Am I correct in understanding that I need to do either C or F but not both? Thanks


It is your money so go head and depreciate but there are few times when that makes more sense. They are 7 year properties.

You only use one form per activity so it is a C or F but more than likely a C is more appropriate.

Edit:
Didn't see there was another page. Michael had already answered the question on years. 

I agree that you can make it fit but unless you are selling stock of bees and have vet bills how does an F better fit? You mentioned feed. Are you buying feed for your bees or are you buying sugar which is just listed as supplies on a C. The IRS tends to not get upset over a F instead of a C as they are both subject to SE tax (compared to passive activities on an E) but unless you truly are running a farm you are using a form that is needlessly complex.


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## JohnK and Sheri (Nov 28, 2004)

I am not knowledgeable about taxes; we have someone who does our returns for us, I just keep the records. 
But, we have always filed form "F", which is for farms and I don't think we had a choice in that. Also, there are advantages that farmers have that form "C" filers don't get, such as not needing unemployment insurance for employees. There are probably others. Once I started selling candles and such retail I started filing that income/expenses with the "C" forms. 
Sheri


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## Templar Ben (Feb 25, 2009)

Are you a farm though?


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## JohnK and Sheri (Nov 28, 2004)

Templar Ben said:


> Are you a farm though?


Well, we _do_ have about 120 million head of livestock......

Seriously, how do you describe a farm? We own 10 acres which includes our home and a warehouse. We til no crops. Some commercial guys we know only own the land their house sits on and an oversized garage. All the beeks whom I know the finances of are in the same situation, they file schedule F. They have bees on other's property as we do ourselves most of the year. Keeping honeybees is an agricultural endeavor, and requires a schedule F, is what our tax guy that does lots of farms tells us. 
Why would one not want to file an "F" if there is a choice?
Sheri


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## Tom G. Laury (May 24, 2008)

*1040s*

I file under schedule F. One advantage is you don't have to file prepaid quarterly estimated withholding ($), just on profit or loss on an annual basis.


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## Templar Ben (Feb 25, 2009)

JohnK and Sheri said:


> Well, we _do_ have about 120 million head of livestock......
> 
> Seriously, how do you describe a farm? We own 10 acres which includes our home and a warehouse. We til no crops. Some commercial guys we know only own the land their house sits on and an oversized garage. All the beeks whom I know the finances of are in the same situation, they file schedule F. They have bees on other's property as we do ourselves most of the year. Keeping honeybees is an agricultural endeavor, and requires a schedule F, is what our tax guy that does lots of farms tells us.
> Why would one not want to file an "F" if there is a choice?
> Sheri


You keep saying we. That tells me you made your first mistake. From the IRS



> If you and your spouse jointly own and operate a farm as an unincorporated business and share in the profits and losses, you are partners in a partnership whether or not you have a formal partnership agreement. File Form 1065 instead of Schedule F.


We can put that aside although now you realize that your tax guy didn't file you properly for however many years. You asked if you have a farm. According to the IRS



> You are in the business of farming if you cultivate, operate, or manage a farm for profit, either as owner or tenant. A farm includes stock, dairy, poultry, fish, fruit, and truck farms. It also includes plantations, ranches, ranges, and orchards.


Stock does not include insects so selling bees won't count. Honey is not a fruit or vegetable so that is out. 

I would use a C instead of an F because that is the appropriate form for most cases. Just as there is a time when MFS makes sense it is quite rare. Times when someone who's only farming income is so tenuous is not one I would want to take to Tax Court.


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## loggermike (Jul 23, 2000)

>>File Form 1065 instead of Schedule F.

On form 1065 there is a place to report farm income. It says to attach... Schedule F. 
I fill out this onerous form(1065) every year.I have always used schedule F. Commercial beekeeping is part of agriculture. Bees are in the Farm bill.


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## Templar Ben (Feb 25, 2009)

loggermike said:


> >>File Form 1065 instead of Schedule F.
> 
> On form 1065 there is a place to report farm income. It says to attach... Schedule F.
> I fill out this onerous form(1065) every year.I have always used schedule F. Commercial beekeeping is part of agriculture. Bees are in the Farm bill.


Congratulations on properly reporting the partnership. Bees in the Farm Bill has nothing to do with tax law. Corn is defined as a grain, grass and fruit according to different parts of the government. 

This conversation was solely about tax law was my understanding.


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## Daisy Kindle (Mar 19, 2009)

*Great topic!*

You all got me curious, so I started looking on the net. I found this from the Dept of Revenue. I will keep looking but thought this was interesting.

http://www.mass.gov/?pageID=dorterm...alcontent&f=dor_rul_reg_lr_lr_81_63&csid=Ador

:applause:

Here is some more....this pertains to income taxes, but is discussing 'business' income as it relates to farming (which it states, includes bees):

Section 1402(a) defines an individual’s “net earnings from selfemployment”
as the gross income derived by an individual from any trade or
business carried on by such individual, also with certain limitations. Section
1402(a)(1) generally excludes from the computation of "net earnings from selfemployment"
rentals from real estate and from personal property leased with the
real estate (including such rentals paid in crop shares) together with the
deductions attributable thereto, unless such rentals are received in the course of
a trade or business as a real estate dealer, with an exception. Under this
exception, any income derived by the owner or tenant of land must be included in
the computation of "net earnings from self-employment" if-
(A) such income is derived under an arrangement, between the
owner or tenant and another individual, which provides that such other individual
shall produce agricultural or horticultural commodities (including livestock, bees,
poultry, and fur-bearing animals and wildlife) on such land, and that there shall
be material participation by the owner or tenant (as determined without regard to
5
any activities of an agent of such owner or tenant) in the production or the
management of the production of such agricultural or horticultural commodities,
and
(B) there is material participation by the owner or tenant (as
determined without regard to any activities of an agent of such owner or tenant)
with respect to any such agricultural or horticultural commodity.
Section 1402(c) provides that the term “trade or business”, when used
with reference to self-employment income or net earnings from self-employment,
shall have the same meaning as when used in section 162 (relating to trade or
business expenses), less allowable deductions.


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## JohnK and Sheri (Nov 28, 2004)

It looks like if my tax guy didn't file us correctly niether did most of the tax guys who file for "bee farmers", we all use schedule F, or all that I know of and those that have chimed in here. Family farms that are not incorporated in Wisconsin file schedule F, or is the entire state filing incorrectly?
Ben I say "we" because we both operate the business, my husband as sole proprietor and myself as an employee. Another benefit of filing schedule F and operating as a farm, is that I can receive my pay in commodity (honey) and am _not_ required to pay social security tax on it. Once the honey is sold I claim either a capital loss or gain, depending on whether it is more or less than the amount claimed as income in the previous year. 
I think, if you look closer, you will see that bees ARE either considered livestock or given their own category within agriculture by the IRS. We receive the agriculture census and qualify for agricultural programs.
I do not know if it is required to use an F rather than a C but I still ask the question, Why would one NOT want to file schedule F, given the advantages farmers receive? What makes the form so much more complicated than a schedule C? 
Sheri


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## Tom G. Laury (May 24, 2008)

*April*

April what? Oh my gosh I better get started!


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## JohnK and Sheri (Nov 28, 2004)

Tom G. Laury said:


> April what? Oh my gosh I better get started!


Our extension is already filed.
Sheri


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## wildbranch2007 (Dec 3, 2008)

JohnK and Sheri said:


> It looks like if my tax guy didn't file us correctly niether did most of the tax guys who file for "bee farmers", we all use schedule F
> Sheri


But my tax guy originally said I had to file schedule C, then I lived in Mass. I changed states and income leveles thats why I asked the IRS which form to use they also said schedule C. They also didn't accept giving honey as rent. The easiest way, in my opionion is to actually pay rent to one farmer for putting bees on the property, they didn't specify how much rent? If you read all the Junk the irs puts out it gets reallly confusing.

mike

just went and looked up how you get the farm exemption if not zoned agricultural.
in N.Y. 7 or more acres need 10,000, less than 7 acres need 50,000, ya think they don't want too many exemptions. so I would think if you got the farm exemption you would be considered a farm and could file schedule f.


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## JohnK and Sheri (Nov 28, 2004)

wildbranch2007 said:


> ......my tax guy originally said I had to file schedule C,.......
> ..... so I would think if you got the farm exemption you would be considered a farm and could file schedule f.


Interesting. Maybe it has to do with the size of the apiary business?
I do know several beeks that do not have property looking anything like a "farm", ie no acreage but perhaps them having the property as the base of their bee biz qualifies the property as agricultural, even though it is only an acre or two.
I hope to be talking to my accountant today and will ask him specifically why we file F instead of C, but again, with the advantages farmers get, I am glad we do.
Sheri


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## MichaelW (Jun 1, 2005)

Its pretty clear to me that the F is the one to use. I have not seen anything that would suggest otherwise. I raise and sell goats as well, so its more clear for me.

Sugar & pollen sub. is feed. My insurance is standard Farm insurance, because even the insurance company considers bees as livestock. Honey and bees are products I raised myself.


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## EastSideBuzz (Apr 12, 2009)

Great Thread. Thanks for all the info.

My business will be adding 200,000 workers this summer. Do I qualify for stimulus money?

I think obama said he was going to save or create 4 million jobs. Are they going to put hives at the white house? t:

Any way thanks for all the info.


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