Education Commons^™

Prepaid Farm Expenses, Jeffrey E. Tranel

Rural Tax Education

Farmers and ranchers often pay for feed, supplies, fertilizer, and other inputs in one year and use those items in the following year. They may do so to pay lower prices, guarantee availability, for planning purposes, and/or other reasons.

The Internal Revenue Code allows qualified farmers and ranchers (farm-related taxpayers) to deduct the costs of such purchases in the year that the purchases are made rather than the year in which such items are used. Generally, the deduction for pre-paid farm supplies is limited to 50% of other deductible farm expenses (all schedule F deductions except supplies) for the year.

What Are Deductible Business Expenses?, Dennis Kauppila

Rural Tax Education

Farmers (and all business owners) pay income taxes based on profit. So, it is important to claim ALL legitimate business expenses to not overstate profits. On the other hand, it is illegal to deduct expenses that are not legitimate business expenses.

Estate Planning, Tamara L. Cushing

Rural Tax Education

No matter your age, as a landowner, a business person, or simply a homeowner with valuables you want to go to someone special, you should be concerned about the future of your business or the distribution of the property in question to the right individual or organization. The intent of estate planning is to plan for the successful distribution of property in accordance with the wishes of the deceased and to do so with a minimum of delay and anguish immediately after the death of an older generation. This is typically one of the most emotional times of our lives …

W-2s For Foreign Agricultural Workers, Suzy Martin

Rural Tax Education

The Internal Revenue Service (IRS) clarified reporting requirements for employers of foreign agricultural workers temporarily in the United States on H-2A visas with an announcement in September 2011. Employers of foreign agricultural workers on an H-2A visa are required to file Form W-2 Wage and Tax Statements on compensation of $600 or more for these workers. Payments made to H-2A workers are exempt from Social Security and Medicare taxes. In addition, employers are not required to withhold federal income tax from the H2-A workers. State and local taxing authorities may require withholding on H2-A labor; farm employers should check on …

Conservation-Related Payments And Expenditures, George Patrick

Rural Tax Education

Concerns about soil erosion, air and water quality, wildlife habitat and environmental protection have resulted in the rapid expansion of conservation-related programs. Generally, the benefits associated with these conservation programs accrue to society as a whole, rather than just to those specific individuals who incurred costs from the implementation of a conservation-related program. For these individuals, costs may exceed benefits. To encourage increased participation in conservation-related activities, payments may be made to producers, rural landowners, and others by federal, state, and local governments and private institutions.

This fact sheet identifies six types of conservation-related payments and expenditures and discusses how …

What Is Farming? Does Reporting Matter?, George Patrick

Rural Tax Education

Many rural families combine a number of economic activities to generate additional family income. Farm production activities may be combined with full-time employment in farming or in the non-farm sector. Part-time employment may involve several seasonal jobs during the year or a part-time job throughout the year.

Generally, an employed individual will receive a Form W-2 reporting the wages received and taxes withheld. In other situations, the individual may be contracted to perform a specified task or provide a service and properly receive a Form 1099-MISC. The individual generally has responsibility for paying the self-employment tax as well as the …

2012 Federal Tax Forms Used By Beginning Farmers And Ranchers, Jc Hobbs

Rural Tax Education

This article provides a list of business and personal tax forms and schedules which farmers and ranchers may experience when filing their annual income tax return. This publication does NOT cover the rules that apply for each of these forms. For a more complete list of forms and publications visit the IRS Forms and Publications website at: http://www.irs.gov/formspubs/article/0,,id=232801,00.html for the most current forms and publications.

Basis, Dennis Kauppila

Rural Tax Education

Basis is a short version of the term ‘Adjusted Tax Basis.’ Basis measures an owner’s investment in an asset. Usually basis decreases each year by the amount of depreciation taken on the asset. When it comes time to sell an asset, basis is just about the only thing that can lower the tax bill. Gains (which are taxable) are figured using basis, so keeping track of the adjusted tax basis of assets is important. This is how basis is used to figure a gain:

Sales Price - Basis = Gain.

Time Value Of Money, Warren Lee

Rural Tax Education

The outcomes of most business decisions occur over an extended period of time, often several years. Thus, most decisions should be analyzed using the concept of time value of money. The time value of money is the general universal preference for “a dollar in hand today is worth more than the prospect of receiving a dollar on some future date”.

It is generally accepted that if you were offered a choice of two alternatives, a gift of $1,000 today or a gift of $1,000 on some future date, such as one year from now, you would elect to receive the …

Lease Vs. Purchase Of Machinery, Warren Lee

Rural Tax Education

Leasing or purchasing of machinery and equipment represent alternative ways for farm operators to acquire assets for agricultural production. Leasing has increased in popularity with agricultural producers. Manufacturers and financial institutions view leasing and selling equipment as alternative means to generate business. By comparing the net present value of the after-tax costs, farmers can determine the least expensive way to acquire machinery or other assets in the farmer’s specific situation. Key factors in the lease vs. purchase decision are the interest rate on loans, lease payments, the taxpayer’s marginal tax rate, and the taxpayer’s after-tax discount rate that reflects …