Table 3. Can I Use the Optional Methods? Summary: These flowcharts are used to determine if the taxpayer is eligible to use the optional methods for reporting nonfarm
and farm
income.Nonfarm income. Start. This is the beginning of the flowchart.Process (a). START here to determine if you can use the nonfarm optional method.
Decision (1). Are your net nonfarm profits less than $1,733?
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IF Yes Continue To Decision (2)
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IF No Continue To Process (b)
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Decision (2). Are your net nonfarm profits less then 72.189% of your gross nonfarm income?
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IF Yes Continue To Decision (3)
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IF No Continue To Process (b)
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Decision (3). Were your actual net earnings from self-employment $400 or more in at least 2 of the 3 tax years before 2004?
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IF Yes Continue To Decision (4)
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IF No Continue To Process (b)
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Decision (4). Have you previously used this method less than 5 years? (Note: There is a 5-year lifetime limit.)
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IF Yes Continue To Process (c)
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IF No Continue To Process (b)
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Process (b). You cannot use the nonfarm optional method.
Process (c). You can use the nonfarm optional method. (See Footnote) See Table 3.Footnote: If you use both optional methods, see Using
Both Optional Methods for limits on the amount to report.
End. This is the end of the flowchart.Farm Income. Start. This is the beginning of the flowchart.Process (a). START here to determine if you can use the farm optional method.
Decision (1). Is your gross farm income $2,400 or less?
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IF Yes Continue To Process (b)
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IF No Continue To Decision (2)
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Process (b). You can use the farm optional method. (See Footnote) See Table 4.Footnote: If you use both optional methods, see Using Both
Optional Methods for limits on the amount to report.
Decision (2). Are your net farm profits less than $1,733?
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IF Yes Continue To Process (b)
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IF No Continue To Process (c)
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Process (c). You cannot use the farm optional method.
End. This is the end of the flowchart.
