Agricultural Lodging

[Avs19]

Hi,

I have a client in Colorado that farms land in Texas. During the farming season, he hires contractors to do the work. Last year, his company rented apartments near the land to house the contractors and purchased 2 small homes for the same reason. I don't believe he can deduct the rent but I came across something in Pub 225 that talks about being able to deduct the costs of maintaining houses and their furnishings for tenants or hired help as farm business expenses. 

Thoughts?

[sjrcpa]

Probably deductible. Research some more.

Also - should the housing costs be taxable to the Contractors?

Should the Contractors really be employees?

[Avs19]

I brought both of those issues up to my client. I think the answer to both questions is yes.

[sjrcpa]

If the workers are required to stay in the company provided housing it may not be taxable to them. Are they on call 24/7?

[Avs19]

I came across that as well but I don't believe they're on call 24/7. The workers live there seasonally to farm the land 8-10 hours during the day. It's only for a few months out of the year and Texas is not their main home.

[BobKamman]

In my country we call contractors "employees" and we have to pay Social Security taxes on their wages.  

[sjrcpa]

Farmworkers may be exempt from SS. I forget.

[BobKamman]

@sjrcpa  If they were exempt, IRS wouldn't have Form 943.  

Where I'm from, "contractors" means "of course they don't have SSNs, you think we could get Americans to do this job?"

[Avs19]

He actually put them on payroll this year. I still don't think it changes how we deduct or report lodging. My thinking is if he pays for their rent, it's reported as wages and deducted. If they live in the houses he owns, we don't report as wages but can deduct certain expenses from the houses.

[sjrcpa]

@BobKamman I forgot about Form 943, or blocked it from memory. My first job in public accounting was for a small firm that had a lot of farm clients. Oh so many years ago.

I wasn't going to go into the legal status of the workers, but I thought about it. I'm sure all of the visas and permits are in good order. 😉