OT- Commodity wages?

My farmer friend and neighbor that I have helped out over the years asked me if I would help him farm for what he called commodity wages. I am retired now and on SSI but not at full retirement age. So I can not earn a lot of money or they take part of it. As I understand him I would be paid an hourly wage and every few weeks we would figure the hours and have the grain elevator transfer that amount of grain to my name. Have any of you worked for commodity wages or paid your help this way? Looking for the benefit and the down side to this. If you receive commodities as a wage how long do you have to hold that commodity before selling? Market crash could be a bummer. Thanks

Income is income for IRS purposes.

Dean

It would still be considered income to you when you sell it, if you sell it in YOUR (hint) name. Value could increase or decrease over time. You"d be paying storage charges at the elevator as long as you held it. Here, that would be 3 cents/bushel per month.

There are several that pay with Payment in kind for the IRS. If it is a hog operation, the numbers must include charging for hog confinment, water, feed, vets, depreciation of the building, manure removal, transporting the hogs, and every other thing you can think of. It certianly is alot of numbers to crunch, but for the large operations, the wages are kept low for tax benifits.

This information is second hand, so probably not perfect in the description.

Did that for a few years; paid employees the local prevailing hourly wage, with a bonus of xxx hundred bushels of soybeans to be transferred into their name at one of the local elevators on November 15th. They had to still be employed as of that date; if they left early, no bonus. It gave them a nice season-ending check and kept me from having to worry about them leaving for an additional 25 cents an hour during harvest. Only ever had one who didn't stick around; sheriff in neighboring county got him on an old warrant in mid-July. I VERY STUPIDLY bailed him out for $2500.00. Case was to be heard sometime in October; he left the country the night before. That was in the late '80s; haven't seen him since. I provided them with the appropriate forms as required by the IRS; never inquired as to how they used them.

It would still be a wage as far as I can see?

Should you try to pass it off as 'farming' then you need to claim it on schedule F, which afects your SS even worse than wages.... (This is why crop share leases have gone away - you can cash rent land as an asset, but you can't still farm (by participating in the gain or loss, decide marketing times, etc.).

--->Paul

It would take the income out of his name. You can then sell it when you want If the price goes down from the day you receive it till you sell it You have a deductible loss. You could sell it when he transfered it to you. He does not have to take withholding and then match it when he does his taxes.

well youve obviously figured out the problem if market went down,the opposite would happen if market went up.The benifit for him would be obvious as his grain would be worth your wages and no more or less,strenghtening his cash flow, allowing him to report less income from crops,and basically doubling his labor force for no cash out lay.Your problem would come when sale day came,do you sell at a profit thereby risking your other income? ,or do you sell at a loss helping reduce your tax liability situation?how exactly would you report this?income?production?two seperate identities,one buisness the other personal?lots of things to consider here,like the others say income is income,and must be reported somewhere( legally of course)Might be better,less paperwork ,less tax liabilities on both sides if he just gifted you the wages,you can still as far as i know gift someone $10K per year,if you made more have him gift that to your wife or something.you basicaly working for free to help him ,he gives you a gift of X number of dollars.he is not liable for workers comp and all the other things ,you dont have to report it because its a gift thats under the feds gift dollar limit..just a thought.

It's not going to gain you a thing. Now, if he would give you other tangible property that you could sell later on, that might work for you.

Jack and M w J- no...it is not a deductible loss. He has no cash outlay in it. Losing money on paper is not a loss. Actually buying in a speculative market, he would be subject to gains and losses.

Your not at full retirement age, so you can just make so much, earned income. Do you have any other farm income to put it with? Beans aren't earned income, are they? Is your wife still working. If he paid you this fall beans were 10.50 today they are 14.20

true!selling it for any price would be a profit.I dont know how you could call it otherwise now that you mention it.You are correct.I think I would run backwards personally.

If you're trying to get income but keep it off the books, there are better ways. Since they're all illegal, and I always try to avoid violating the lawyer Rules of Professional Conduct, I won't go into them.

If you work 100 hours, and get 100 bushels of $10 soybeans as compensation, you have been paid $1,000 "in kind", which is the same as being paid $1,000. Less clear is what happens if you hold them for 3 months and sell at either a profit or loss. Can you just declare whatever you end up with as wages, and report it as such? Or do you have to show the value as of the time of "payment" as wages, then the gain or loss as capital gain or loss? Not sure. As long as you keep it "short-term", the numbers come out the same anyhow.

Probably doesn't matter, because you don't want to do this anyhow. If Social Security catches you, you're screwed, and if you get hurt, you don't have any workmens comp, and you're screwed again.

Not a whole lot of upside to this scheme.

Does the elevator sell misc. items you could use in personal affairs?? I know my local elevator sells fuel, implements, tractors, etc. If they do, you can perhaps work out a deal to sign over your shares to them directly from the farmer in exchange for something you can use, or perhaps sell.

I dont see how it will gain you much. Its still earned income for your social security. It helps him as paying you in commodities keeps him from paying employers half social security but you've still got to report and pay both parts on it. Much better if he pays you in fuel, groceries, supplies, etc that you wont have to exchange for money. Not saying thats legal and its certainly not legal advice or tax advice. If he pays you in fuel, that still appears to be business deduction for him....... no way to prove otherwise.....

Definitely illegal. What is worse for him is that there will be a paper trail (starts with the initial scale tickets) in grain tickets that will end up being produced in an IRS audit. They catch it and he will have to pay back payroll taxes and applicable penalties. If it is an hourly wage, it is wages to you subject to your share of social security. You could claim it as self employment income but calling it commodity wages will just raise a red flag. There are 22 factors the state and the IRS use to determine if someone is self employed or an employee drawing wages. You probably couldn't make them work in your situation. There is a special rule for farm labor and payroll taxes but I can't quote it off the top of my head. Taking your pay in gas and other expensable items would be very hard to trace depending upon how the tickets are prepared but still an illegal evasion of payroll taxes. Like Mike said, about the time you get hurt without insurance, it will all unravel with your SSI. The law requires you to report your income as you are taking taxpayer money because of a disability and us taxpayers don't like to be defrauded. And if they think you can work, then I suppose they could take a new look at your SSI. Only thing I can recommend is to follow the law and report your income. Guess you can work for free all you want.

It's NOT NECESSARILY illegal. As long as he issues you a W-2 that includes the value of the commodities, he isn't breaking any laws. "Commodity wages" aren't subject to FICA payroll taxes. But, assuming he's going to be legit and issue you a W-2, you need to consider what's in it for him, and what's in it for you.

He gets to avoid paying half your FICA (SS/Medicare) taxes.

You also avoid paying any FICA taxes. But the income is still taxable and still counts against your earned income for Social Security purposes.

Commodity wages are discussed in the IRS link below
Farm income and Social Security taxes

Good eye, bc- I didn't catch that it was SSI- I just thought it was a concern about earning too much and getting docked on Social Security.

The SSI angle brings in a whole new scenario- it makes your scheme self-cancelling in case of audit, because if you're healthy enough to do farm work, that'll be the end of the SSI payments!

But there's good news, even after the gravy train derails- then, you can make as much money as you want! Ain't capitalism great?

Mark is technically correct on the not illegal for the farmer if he provided a W-2 but that would defeat the intent of what the poster wanted to do which is collect some wages more than SSI allows which makes it illegal as I read it. Also according to the IRS, if they deem the commodity wages as cash wages (meaning he regularly sells the commodities for cash), then the IRS could restructure it and require the farmer has to pay social security taxes. Of course if you sit on the commodities, then you pay storage and run the risk of the price going down. The W-2 income figures would be based on the commodity price on the date of the transaction. Either way the poster pays income taxes and if he made any false reports to SSI, the W-2 would be a red flag and probably prima facie evidence to net the poster some time in a facility where they provide him 3 hots and a cot.

I don't know what others run into, but the two elevators I deal with compute all sales back to the original scale ticket so they get the dockages and storage fees properly calculated. Any partial sales and transfers would show up on the final ticket. I know there are plenty of articles written about the low percentage of returns that get audited, but I tell people to follow the law to start with and then there is nothing to worry about when the rare audit ever happens. An IRS review would find those transfers.

What the poster was talking about would be a conspiracy between him and the farmer. I've seen countless co-conspirators get ratted out by the other. My favorite is when someone takes the stand in a contempt case for non-payment, they usually get boxed into a corner about working and openly admit they are working under the table for some contractor or farmer. A better choice of words would be that they are self employed independent sub contractors but when they get on the stand they get flustered and its always comes out working under the table.

Regarding SSI. It seems it is near impossible to get it without showing complete disability and only after you appeal the initial denial. Revisiting it and taking it away are probably not that common. I can think of an SSI case for depression who works the minimimum allowed hours as a licensed cosmotologist doing hair to supplement the SSI and should she work more hours they just cut her SSI and make no bones about her ability to work. Another one is a person who is deaf that works generally full time. Had the SSI award for over 40 years. The only time they pay any SSI is if she gets laid off or hours cut back or something which is rare. Her deafness will never change so there is no point for them to revisit it.