1120S Farming Company

I recently picked up a farming client who has a S Corporation. The old CPA was from a large regional firm and filed the taxes with a Schedule F attached. The revenue from Sch F carried to page one line #5 of the 1120S with a statement "Farm Gross Income (Schedule F, line 9) and the expenses from Sch F carried to the other deduction line on page one of the 1120S with a statement "Total Farm Expenses (Schedule F, line 33).

Is this the correct way to file the return or can I put all gross income on page 1 Line 1 Gross Receipts and the expenses are other deductions/COGS? I haven't seen other farming clients use this format for S Corporations so any advice/literature would be appreciated.

Can't say if it's right or wrong but my software (TaxACT) does it the same as your client's prior CPA firm. Farmers can use income averaging so I would keep it separate.

I would think it would need to be treated as the old CPA treated it, as the Farm income and Expenses belong on Sch F, not Sch E..

ProSystems FX does it the same way. It doesn't actually use a Schedule F but a schedule that looks just like it.

Schedule F does not really belong as part of an 1120-S (hint: look at the top of the Schedule) but it does make sense to track farm income for Schedule J purposes. That said, it would be equally if not more correct to use line 1. Neither is wrong as long as the farm income is identified.

I do wonder what actually goes electronically to IRS though because they usually don't accept inapplicable forms in the transmission and technically Schedule F is not an applicable form for 1120-S

ProSystems FX does it the same way. It doesn't actually use a Schedule F but a schedule that looks just like it.

That's interesting. I was doing more research and found on the CCH Knowledge base this info about Schedule F's:

https://support.cch.com/kb/solution.aspx/sw1413

"How do I produce a Schedule F when preparing a Corporation or S Corporation return?
Schedule F (Form 1040) is produced in the Individual (1040), Fiduciary (1041) and Partnership (1065) Systems. It is not produced in the S Corporation (1120S) system.
Per IRS instructions: "Use Schedule F (Form 1040) to report farm income and expenses. File it with Form 1040, 1040NR, 1041, 1065, or 1065-B."

Corporation and S Corporation returns do not use Schedule F (Form 1040)."


Would you guys recommend continuing what the prior accountant did or entering in everything the same as before? My client is currently under IRS audit and I don't want to ruffle any feathers. However, I don't want to get in trouble for filing incorrectly as well. Thoughts?