If you are a farmer, you may have heard of the “March 1st” deadline to file and pay your taxes. This has to do with a special provision in the tax code which allows individual taxpayers with 2/3 of their gross income from farming or fishing business ventures to not pay estimated taxes throughout the year without penalty as long as they meet one of the following:

Note: If the due date for making an estimated tax payment, or March 1st falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that's not a Saturday, Sunday, or legal holiday.

Most who are familiar with this provision, only know about the March 1st deadline and not the lesser known January 15th estimated tax option. The January option is great because the March 1st deadline is not realistic for most taxpayers with other income streams. Many of which do not have all their tax documents issued to them by then.

Even if you do not file by March 1st, and miss the January 15th deadline, as long as you qualify as a “2/3 farmer”, the IRS will only assess the underpayment penalty (late interest) from January 15th until you do pay the tax.

“Gross” means before deductions, so even if your farming net profit (after deductions) is not 2/3 of your total take home profit, you may qualify. I have built the following spreadsheet to calculate gross farm income with the highlighted cells representing eligible farm sources:

IRS Pub 225- Farmer’s Tax Guide (attached below) contains a detailed breakdown in chapter 15.

Even if your current tax year’s farm income drops below 2/3 of your total gross income. You still qualify if you were above 2/3 for the preceding tax year.

Example:

Bill’s gross farm income was 70% of his overall gross income for tax year 2024 and 60% in 2025. Since his 2024 gross farm income was greater than 2/3 of total, he therefore automatically qualifies as a “2/3 farmer” for both 2024 & 2025. Even if 2025 gross farm income dropped below 2/3. In this case, he would need 2026 gross income to be at least 2/3 from farming to qualify in 2026 since 2025 was less than 2/3 from farming.

This is a benefit for farmers because it opens up cash flow throughout the year by not having to pay taxes until after the year is over. The IRS gives farmers a break here because trying to estimate your tax liability during the year is an impossible task, given that you have no idea how your crop will yield, input costs, and market fluctuation. In the earlier example, if Bill paid estimated taxes on the standard payment schedule, he would have made payments in April, June, and September that weren’t really due until January. That is money that Bill could save months worth of interest on or have kept invested.

If you are used to making quarterly estimated tax payments each quarter and believe you qualify, you can check your prior year tax return. When year-end planning rolls around, discuss with your tax practitioner if you need to make a fourth-quarter estimated tax payment due January 15th. This ensures you avoid any unnecessary penalties, and keep your operation running throughout the year with optimal cash flow.

Monitoring if you qualify as a “2/3 farmer” is one of the many benefits of using a farm specialized CPA. If you’re unsure whether you qualify—or want to stop overpaying estimates—feel free to email me at [email protected].

Thanks for reading!

-Blake

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