If Net Income is Unreasonably Low on this page. With planning, many farm taxpayers can know what their tax liabilities will be, and make changes to decrease the impact of taxes on their farm over time. While this may be true in terms of an individual farmer's physical production year, it may or may not be the case in terms of the tax year. In adverse crop production years, a farmer may lose sight of the status of his or her tax year until it is too late to manage the income tax liability.
Taxable income can be either higher or lower than normal in adverse production years.
Higher than normal incomes may result if the producer has a normal practice of selling crops in the year after the year of production, and then, due to financial pressures, also sells the current year's production in the same tax year. Receipts of crop insurance and disaster payments may also affect the timing of income to the producer. Livestock producers may sell livestock in numbers in excess of their normal practice due to the lack of or price of feed ingredients. Some relief, however, is generally available to farmers with higher than normal incomes. There is an exception to the general rule that cash basis farmers must report income in the year it is received.