Year-end tax steps still possible for farmersIn a year filled with tax changes great and small, at least one long-standing piece of advice still applies. Farmers and ranchers should consider deferring income and accelerating expenses.
By: Jonathan Knutson, Agweek
In a year filled with tax changes great and small, at least one long-standing piece of advice still applies.
Farmers and ranchers should consider deferring income and accelerating expenses.
Deferring income until 2011 and prepaying some 2011 expenses in 2010 can make sense, especially for producers who enjoyed good harvests this year, said Ron Haugen, a North Dakota State University Extension Service farm economist.
Spreading out taxable income, to avoid years with a lot of it or very little of it, is a good idea, he said.
With December nearly over, producers have only a few days left to take several steps that could help them better manage their taxes. The steps include:
- Prepaying farm expenses such as seed and fertilizer. The prepaid expenses can’t exceed 50 percent of other deductible farm expenses.
- Paying real estate taxes or interest to increase 2010 expenses.
- Deferring income from crop and livestock sales until 2011 by using a deferred payment contract.
- Buying machinery or equipment.
- Deferring crop insurance proceeds until the next tax year. Several restrictions and qualifications apply.
More information on agricultural topics can be found in the Farmers Tax Guide, Publication 225. It’s available at IRS offices or (800) 829-3676.
Many CHS patrons this tax season are confronted with the complicated IRS Section 199 and related rulings, which give an enhanced deduction for ag activities.
Members of the giant Twin Cities-based cooperative were mailed relevant tax forms in November and will receive mailings in January.
CHS customers — who include individual growers selling direct to the cooperative’s processing locations or grain terminals — across the entire CHS trade area will receive the statements, said Annette Degan, a company spokeswoman.
CHS is telling customers who receive the statements to consult with a tax adviser, she said.