Understanding Farm Finances: A Practical Guide for Wyoming Farmers and Ranchers

Managing a farm or ranch in Wyoming is more than just growing crops or raising livestock—it also means keeping your finances in order and meeting tax requirements. Even if accounting isn’t your strong suit, having a basic understanding of how your farm’s finances work can make a big difference in your bottom line—and help you avoid costly mistakes at tax time.

This guide breaks down key ideas in plain language to help you stay on top of your business.

Why Good Records Matter

Think of your records like your farm’s financial fence—they keep things secure and organized.

Good financial records help you:

• File accurate tax returns and prove your income and expenses to the IRS if needed.
• See how your farm is really doing—are you making money or just getting by?
• Work with banks or lenders more easily by having clear reports.
• Separate farm income from personal income, and track which expenses can lower your tax bill.

👉 You don’t need a fancy accounting system—just one that clearly shows what money comes in and goes out. Store receipts, invoices, and payment records in folders by year and category.

Choosing a Farm Accounting Method

Most farmers use one of two accounting methods:

• Cash Method (most common): You count income when you receive it and expenses when you pay them.
• Accrual Method: You count income and expenses when they’re earned or incurred, even if cash hasn’t changed hands yet. This is required if you keep inventory (like feed or harvested crops held for sale).

📝 You usually choose your method when you file your first tax return with a Schedule F (your farm’s profit/loss form). Changing it later requires IRS approval.

What Goes on Schedule F (Form 1040)

Schedule F is the main IRS form farmers use to report farm income and expenses.

Income includes:

• Sales of crops, livestock, hay, or eggs.
• Crop insurance payouts or USDA program payments.
• Custom hire work (if you’re paid to do farm work for others).
• Co-op dividends or gas tax refunds.

Expenses include:

• Hired labor, supplies, repairs, fuel, rent, utilities, and insurance.
• Loan interest, tools under $2,500, and the cost of filing your farm taxes.
• Payroll taxes if you have employees (e.g., Social Security and Medicare).

🚜 For items used for both personal and business purposes (like a truck), you must separate the farm portion from the personal one.

What About Equipment and Big Purchases?

Big investments like tractors or barns are handled differently:

• You can’t deduct the full cost all at once.
• Instead, you depreciate them—spread the cost over several years.
• Records must show when the item was put in use, how much it cost, and what method of depreciation you chose.

Do You Hire Help? Know Your Tax Responsibilities

If you pay wages to farmhands or staff, you may need to:

• Withhold income taxes and Social Security/Medicare from paychecks.
• Pay your share of payroll taxes.
• File IRS Form 943 (farm employers) and give employees a W-2.
• For outside help (like a fencing contractor), issue a Form 1099-NEC if they’re not your employee.

Self-Employment Tax for Farm Owners

As a self-employed farmer, you pay self-employment tax—this covers your Social Security and Medicare. It’s calculated from your net farm income (from Schedule F).

If you run the farm with your spouse, you may qualify as a Qualified Joint Venture, letting you split the income and each get Social Security credit.