There has been some confusion regarding whether CRP payments are subject to SE (Self Employment) tax. The IRS attempted to clarify the situation when it released a proposed revenue ruling on December 15, 2006.1 Unfortunately, this ruling is unfavorable to many CRP recipients. For some taxpayers, this proposed revenue rule may affect the way their tax preparers report CRP income in 2007. Income from farm rent is generally not subject to SE tax. In the past, it was thought that CRP payments were a form of cash rent paid because the landowner removed the land from production. The proposed ruling makes all CRP rental
payments subject to SE tax regardless of whether the recipient is engaged in a
farming business on non-CRP land. Prior to the ruling it was thought that only those
recipients who were materially participating in a farming operation qualified for the SE
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