Agriculture Tax Information

Gregory J. Cook, EA, CPA+ Accredited Tax Advisor Past President Alabama Society of Enrolled Agents Past President Alabama Association of Accountants

If you buy farm supplies through a cooperative, you may receive income from the cooperative in the form of patronage dividends. If you sell your farm products through a cooperative, you may receive either patronage dividends or a per-unit retain certificate from the cooperative. A per-unit retain certificate is any written notice that shows the stated dollar amount of a per-unit retain allocation made to you by the cooperative. A per-unit retain allocation is an amount paid to patrons for products sold for them that is fixed without regard to the net earnings of the cooperative. These allocations can be paid in money, other property, or qualified certificates. Per-unit Retain Certificates issued by a cooperative generally receive the same tax treatment as Patronage Dividends.

Generally the cooperative will report the income to you on Form 1099-PATR.

Instructions for Recipient
 
Distributions you received from a cooperative may be includible in your income. Generally, if you are an individual, report any amounts shown in boxes 1, 2, 3, and 5 as income, unless nontaxable, on Schedule F (Form 1040), Schedule C (Form 1040), or Form 4835. See the Instructions for Schedule F (Form 1040) and Pub. 225 for more information.

Account number. May show an account or other unique number the payer assigned to distinguish your account.
Box 1. Shows patronage dividends paid to you during the year in cash, qualified written notices of allocation (at stated dollar value), or other property (not including nonqualified allocations). Any dividends paid on (1) property bought for personal use or (2) capital assets or depreciable property used in your business are not taxable. However, if (2) applies, reduce the basis of the assets by this amount.
Box 2. Shows nonpatronage distributions paid to you during the year in cash, qualified written notices of allocation, or other property (not including nonqualified written notices of allocation).
Box 3. Shows per-unit retain allocations paid to you during the year in cash, qualified per-unit retain certificates, or other property.
Box 4. Shows backup withholding. Generally, a payer must backup withhold if you did not furnish your taxpayer identification number to the payer. See Form W-9 for information on backup withholding. Include this amount on your income tax return as tax withheld.
Box 5. Shows amounts you received when you redeemed nonqualified written notices of allocation and nonqualified per-unit retain allocations. Because Box 6. Shows the deduction amount you may take based on your portion of patronage dividends or per-unit retain allocations (boxes 1 and 3) attributable to qualified production activities income. To claim the deduction amount, this amount must have been designated in a written notice sent to you from the cooperative within the payment period under section 1382(d). Enter on the appropriate line of Form 8903.
Boxes 7, 8, and 10. These boxes may show unused credits and deductions passed through to you by the cooperative. Generally, if your only source for a credit is from the cooperative, you are not required to complete the source credit form or attach it to Form 3800. Therefore, the following credits may be reported directly on Form 3800: the renewable electricity production credit (Form 8835, Part I); the Indian employment credit (Form 8845); and the energy efficient appliance credit (Form 8909). However, for the following credits, complete the forms shown and follow the instructions on the form for how to report the credit: the investment credit (Form 3468); the work opportunity credit (Form 5884); the renewable electricity, refined coal, and Indian coal production credit (Form 8835, Part II); the small ethanol and cellulosic biofuel producer credits (Form 6478); the biodiesel and renewable diesel fuels credit (Form 8864); and the agricultural chemicals security credit (Form 8931). For information on how to report other credits and deductions (including depreciation) that may be passed through to you, see the instructions for Schedules C and F (Form 1040) and Pub. 946.
Box 9. Shows the alternative minimum tax (AMT) adjustment passed through to you by the cooperative. Report this amount on Form 6251 on the appropriate line in Part I.