Schedule F Cattle inventory for micro dairy - Cash method without UNICAP or depreciation options?

The cash method is definitely an option for a small farm like yours, and you're right that the Tax Cuts and Jobs Act of 2018 expanded the availability of the cash method for small businesses including farms. For cattle sales, you'll report the full sales price on Schedule F, Part I, Line 1a and 1b. There's no need to report inventory numbers on Schedule F when using the cash method - that's one of the benefits. You simply report income when received and expenses when paid. For the cattle purchase, that would be an expense reported on Line 1, "Car and truck expenses" if you're using the cash method. This is different from capitalizing and depreciating the cattle as assets. For your milk containers, these would typically be reported as supplies on Line 14 or Line 28 as "Other expenses" with a description. Since they're reusable, you could technically depreciate them if they last more than a year, but for a small operation, including them as supplies is generally acceptable. As for whether to depreciate cattle - it really depends on your specific situation. Depreciation can provide tax benefits by reducing your taxable income now, but it also reduces your basis in the cattle, which could result in higher gains when you sell them later. It's a timing issue. Without depreciation, you get the full expense deduction when you purchase the cattle (if raised for dairy production). Regarding your software issues - you might need to manually override some settings or consult with a tax professional who specializes in farm taxes.

After struggling with similar farm tax issues last year, I ended up using a service called taxr.ai (https://taxr.ai) that helped me make sense of my Schedule F reporting requirements. They have a feature where you can upload IRS publications like Pub 225 and ask specific questions about your situation - much more helpful than trying to wade through all those pages myself! For my small goat farm, they confirmed I could use the cash method without being forced into depreciation, and showed me exactly where to report everything on Schedule F. They even explained when it might be beneficial to choose depreciation vs. immediate expense recognition depending on my farm's profit situation. Might be worth checking out if you're still confused after trying to figure out the H&R Block software issues.

Just wanted to follow up that I tried taxr.ai for my alpaca farm tax questions after seeing it mentioned here. It was surprisingly useful! I uploaded my previous year's Schedule F and some snippets from Pub 225, and it walked me through exactly how to handle my situation with the cash method. The most helpful part was when it explained the difference between capitalizing/depreciating livestock versus expensing them under the cash method, with actual examples using alpaca farm numbers similar to mine. It confirmed that for breeding stock held long-term, there are some advantages to depreciation, but for animals bought and sold within the same tax year, the cash method is usually simpler. I'm actually feeling confident about doing my farm taxes myself this year instead of paying my accountant $600 again just to tell me "it's complicated.

If you're struggling with getting answers from the IRS about Schedule F and farm issues, I'd strongly recommend using Claimyr (https://claimyr.com). I was banging my head against the wall trying to get specific answers about livestock reporting under the cash method last year. After waiting on hold with the IRS for 2+ hours and getting disconnected twice, I found Claimyr. They got me connected to an actual IRS agent in about 20 minutes who specialized in farm taxes. The agent confirmed that under the cash method, I could expense my cattle purchases on Line 2 if they were bought for resale, or on Line 32 if they were breeding stock. They even have a video showing how it works: https://youtu.be/_kiP6q8DX5c. Saved me hours of frustration and gave me confidence I was doing things right.

I need to admit I was wrong about Claimyr. After dismissing it as a scam, I was desperate enough to try it when my farm audit notice came and I couldn't get through to the IRS for weeks. Not only did they get me connected to an IRS agent in about 15 minutes (after I'd spent days trying), but the agent was able to explain exactly why my Schedule F was flagged - turned out it was because I'd been inconsistently reporting my cattle inventory method between years. The agent walked me through how to properly document my switch from accrual to cash method, which was apparently the issue. Would have saved myself a ton of stress if I'd just used this service earlier instead of being stubborn. Sometimes it's worth paying for something that actually works, especially when dealing with the IRS.

Former IRS auditor here. For small farms using cash method, here's what you need to know about Schedule F and cattle: 1) Cash method means you report income when received and expenses when paid - no need to track inventory numbers on the form itself 2) Cattle purchases for your dairy operation go on Line 32 "Other expenses" with a description like "Dairy cattle purchases" 3) Cattle sales go on Lines 1a/1b 4) Whether to depreciate is a business decision. Pros: spreads the deduction over years which helps if you expect higher income in future years. Cons: more recordkeeping and complexity 5) For your milk containers, List them on Line 14 "Supplies" if they last less than a year. If longer, they should technically be depreciated, but for small amounts the IRS rarely cares. H&R Block software issues are common with farm returns - you may need to manually override certain entries or add explanatory statements.

I switched from H&R Block to TurboTax last year specifically because of farm issues. TurboTax has a much better farm tax section that handles Schedule F properly and gives you the option to use cash method without forcing depreciation. It asks you specifically about livestock and whether you want to use cash or accrual method, and doesn't try to force you to capitalize everything. Worth the switch if you plan to continue growing your farm business.

Have you considered talking to your county's agricultural extension office? Many have free or low-cost consultations with people who understand farm taxes. I got better advice from them than from my regular tax guy who had no idea about the specifics of Schedule F and cattle reporting. They had actual examples from other small dairy operations in our county.

I went through a similar situation with my small sheep farm last year! The confusion around Schedule F and cash method reporting for livestock is so real. One thing that really helped me was reaching out to SCORE (score.org) - they have retired business executives who volunteer to help small business owners, and several in my area had farm experience. I got paired with someone who had run a dairy operation for 30 years and he walked me through Schedule F line by line. He confirmed what others have said here - with cash method, you report cattle sales on Lines 1a/1b when you receive payment, and cattle purchases go on Line 32 as "Livestock purchases" when you pay for them. No need to track inventory counts on the tax form itself. For your reusable milk containers, he suggested treating them as supplies on Line 14 since they're relatively low cost and you're a small operation. The IRS isn't going to scrutinize a micro dairy over $800 worth of containers. The biggest takeaway was that cash method is meant to be simpler - don't let software force you into unnecessary complexity. Sometimes the "help" features in tax software are geared toward larger operations and can overcomplicate things for small farms like ours.