Finally - Clarity on Schedule F Farmers for PPP

Published on: 11:32AM Apr 26, 2020

After almost a full month, we now has clarity on how to calculate the loan amount for Schedule F farmers and other entities.

It is clarity, but likely for many farmers not what they wanted to see.  If you show a loss on line 34 of Schedule F you do not qualify for any loan based on your earnings.  You would qualify for a loan for any employee payroll costs.

If you are a farm partnership, it is a little more complicated.  First, you are allowed all of your employee payroll costs.  You then get to add in all of the partner's self-employment income calculated as follows:

  • Total SE income reported on line 14a of Schedule K/K-1, reduced by:
  • Any Section 179 expense deduction claimed, unreimbursed partnership expenses claimed and depletion claimed on oil and gas properties (likely does not apply to most farmers);
  • Then multiplied by 92.35% to arrive at net SE earnings.

If this amount is over $100,000, then reduce to $100,000.  Multiplying by 92.35% for Schedule F farmers appears not to be required but may be required in a future announcement since the same calculations usually apply to Schedule C and Schedule F filers on Schedule SE.

Many farm partnerships have a manager managed LLC structure that allows for a reduction in self-employment tax.  Even though this income is considered to be ordinary income, it appears that none of that income will qualify for PPP loans.

 

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