It’s that time of year again — tax season. And, that could mean that as a 4-H or FFA member, if you made over $600 in income or winnings, it may be your turn to file.
This year, those taxes are due by April 18. The Tax Reform Act of 1986 specifically gave attention to income received on the sale of animals, but that doesn’t mean that it ends at animals.
For anyone who participates in a 4-H Club or FFA project, any net income received from sales or prizes related to the project may be subject to income tax. If you’re receiving income through a fair board or organization, you’ll likely be issued a 1099-MISC by the organization that sponsored the sale.
Here are a few suggestions to help 4-H and FFA members prepare to meet with a tax professional before filing:
Keep records of your project from the beginning
When you file your taxes, you’ll be allowed the opportunity to report net income and attach a statement showing gross income and expenses. 4-H and FFA advisors know what they’re talking about when they suggest that you keep your ledgers up-to-date in your 4-H or SAE record books.
Don’t worry, if you didn’t keep diligent records, looking through card statements and bank records can help you to put a list of expenses back together. Some companies can even pull up a purchase record from the year for you to help make things a little bit easier.
Don’t forget less obvious expenses
Keeping these records as you go, and creating a safe place for your receipts, will help you to prepare for filing taxes each year and make your business decisions for the following year. But, don’t forget some of the less obvious expenses: travel costs associated with your project will add up, and so will utilities and facility maintenance.
Here are some other more common possible expenses:
- Feed costs
- Veterinary costs
- Supply purchases
- Entry fees
- Equipment purchases
- Clinic or educational registration costs
- Membership dues
- Animal identification expenses
You might be able to skip out on self-employment taxes
The self-employment tax rate is a whopping 15.3 percent, and anyone who earns a net of at least $400 is subject to paying self-employment. However, the IRS Publication 225 (2022) specifies that projects used for educational purposes and not profit may not be subject to the self-employment tax if they’re conducted under the rules and economic restrictions of 4-H or FFA.
Net income may be reported as “Other income” on Schedule 1 (Form 1040), line 8z. From there, you can attach that statement showing gross income and expenses.
Claiming your FFA or 4-H member as a dependent
Even though they’ve earned income, and are filing taxes this year, parents and guardians can still claim 4-H and FFA members as a dependent as long as they meet the IRS’s requirements. Some of these requirements include falling under the age of 19 during the tax year, residing with you for more than half the year, and not providing more than half of their own financial support.
Filing taxes as an 4-H or FFA member can serve to teach youth just one more thing about leadership and financial management. Make sure to refer to the current IRS regulations as your best resource as you go about filing taxes this year. While this article may serve as a helpful reminder, it should not be construed as tax advice — a tax professional can help you to navigate these regulations if you find yourself in need of help navigating the tax code.