Search Site   
Current News Stories
Solar eclipse, new moon coming April 8
Mystery illness affecting dairy cattle in Texas Panhandle
Teach others to live sustainably
Gun safety begins early
Hard-cooked eggs recipes great for Easter, anytime
Michigan carrot producers to vote on program continuation
Suggestions to celebrate 50th wedding anniversary
USDA finalizes new ‘Product of the USA’ labeling rule 
U.S. weather outlooks currently favoring early planting season
Weaver Popcorn Hybrids expanding and moving to new facility
Role of women in agriculture changing Hoosier dairy farmer says
   
News Articles
Search News  
   
There's still time to adequately prepare for submitting tax info
 

 

HUNTINGTON, Ind. — Longtime farmer clients of Brandy Swope, a certified public accountant with Kline’s CPA Group, know what information she needs when they visit her office during tax preparation season.

“It’s a joke between me and my clients,” she explained. “They know what I expect. I need all of their tax documents. If it’s a corporation or partnership, I also need the loan documents. They also need to bring in their bank statements.”

Tax preparers and farmers are working with three upcoming deadlines. Producers who derive two-thirds of their income from their farm can avoid paying estimated taxes during the year if they file and pay their taxes by March 1. Entities such as corporations must file by March 15. And April 17 is the deadline for individual filers.

Federal taxes may be amended up to three years after filing. States may have different deadlines to amend returns.

Farmers sometimes get into what Swope calls the “coffee shop” trap: “They’ll say, ‘I heard that you can do this’ or ‘my neighbor did that.’ They have to realize that every situation is unique.

“The biggest mistake farmers make is they always want to defer taxes. Nobody wants to pay taxes. I’m not a magician. We end up just pushing it down the road.”

Ben Romine, enrolled agent and tax manager with The Romine Group in Columbia City, Ind., also asks his clients for as much farm-related information as possible when preparing their taxes.

“They need to bring in decent documentation for farm income and expenses,” he said. “They need their 1099s for government payments and crop insurance. If they purchased assets, they need their purchase sheets, especially if there was a trade-in. The majority I work with have decent records. Some still keep manual records, but most don’t come in with a shoebox anymore.”

In addition to income, expense and purchase records, producers should share any documentation pertaining to changes on the farm, said Michael Langemeier, a Purdue University professor of agricultural economics.

“Preparers need to know about anything to do with changes to the land and buildings,” he pointed out. “Did you tear down a building or did you add one? Did you make repairs? Part of business management is keeping good records. These are simple things, but they are so important. I still see people who don’t do that.”

Farmers should be careful with how they use the prepaid expenses deduction, Romine said. For example, a producer may go into a co-op or seed company in November or December and put down $50,000 for the next year’s seed and other supplies. The IRS may classify the $50,000 as a deposit instead of a pre-payment, meaning the farmer isn’t eligible for the deduction.

Swope encourages farmers to take advantage of farm income averaging, which allows a producer to average some or all of the current year’s farm income by spreading it over the past three years. This provision may cut taxes if farm income is high in the current year and low in the prior three years.

Wages for full- and part-time workers may be deducted if the producer withholds Social Security, Medicare and income taxes from their wages, she noted. Employment taxes aren’t required to be withheld if wages are paid in-kind with commodities.

When buying a new farm, the use of tile maps will allow a producer to expense a portion of the land purchase as a depreciable item, Swope said. The IRS will probably disallow any depreciation claimed without a tile map, she added.

Swope and Romine encourage their clients to meet with them toward the end of each year.

“I don’t want them to look at things as a one-year picture,” Swope explained. “We look at the bigger picture – what are you planting, what is your cash picture like? We’re looking out for succession planning, estate planning. My December is way more harried than tax season.”

Year-end meetings are always important, but are more crucial this year given the changes coming with the federal tax overhaul bill, Romine said. The law changed corporate and individual tax rates, raised the estate tax exemption level and altered some expensing used by farmers.

“A majority of the tax reform act – 98, 99 percent – goes into effect for 2018,” he said. “I advise any farmer to have a conversation with their tax preparer prior to the end of the year. In our client base, over half are fairly up on the changes in tax laws. We’re getting calls daily asking how certain provisions may affect their operations.”

2/21/2018