IRS May Be Backing Off on Assessing Self-Employment Tax in Some Cases

The IRS has tried to assess self-employment tax on receipt of Conservation Reserve Program (CRP) payments even if the taxpayer was not a farmer.

Also, if a farmer makes the de minimis election to expense all items costing less than $2,500, the later sale of these items were assumed to be subject to self-employment tax.  However, in an informal communication from the IRS; they state that the sale of breeding stock that was expensed under the de minimis election is not subject to SE tax.  Instead it is reported on Form 4797 and just treated as ordinary income.

However, this letter stresses this is a fact-by-fact case.

  • Principal
  • CliftonLarsonAllen
  • Yakima, Washington
  • 509-823-2920

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Yakima, Washington, as well as a regular speaker at national conferences and contributor at Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives combine each summer for his cousins and that is what he considers a vacation. Leave a comment for Paul. If you would like to leave a comment for Paul, follow the link above, however, please make sure to include your email address so that he can reply to your comment (your email address will not automatically show up).


Alana –

Can you tell me what informal communication document you are referencing in your article above that the IRS may not consider sale of breeding stock expensed under de minimis subject to SE tax and instead reported on Form 4797? Thanks in advance for your help!

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