Hello Northeast Ohio! I cannot believe that January has come to a close already.
2013 has already been an interesting year due to the passage of the American Taxpayer Relief Act of 2012 in early January. This fiscal cliff legislation includes a nine-month partial farm bill extension.
Congress will now have until Oct. 1 to pass a more typical five-year farm bill. Many expect the key components of last year’s farm bill proposals — an end to direct payments, new crop insurance programs and cuts in nutrition initiatives — to be included in the new legislation.
At any rate, it will make for an interesting farm bill negotiation in 2013.
There are a few provisions of this legislation which are important to our local agricultural community as we head into tax season. Today, I would like to examine these provisions and let you know of a farm tax webinar that farmers can participate in from the comfort of their living room.
Farm filing extended
The IRS announced two weeks ago that the tax filing deadline has been extended to April 15 from March 1 for farmers. This extension was necessary because the fiscal cliff legislation affected several tax forms that are often filed by farmers including the Form 4562, Depreciation and Amortization.
These forms will require extensive programming and testing of IRS systems, which will delay the IRS’s ability to accept and process these forms. The IRS is providing this relief because these delays.
Normally, farmers who choose not to make quarterly estimated tax payments are not subject to a penalty if they file their returns and pay the full amount of tax due by March 1.
Under the guidance issued by the IRS, farmers who miss the March 1 deadline will not be subject to the penalty if they file and pay by April 15.
A taxpayer qualifies as a farmer for tax-year 2012 if at least two-thirds of their total gross income was from farming in either 2011 or 2012.
Farmers requesting this penalty waiver must attach Form 2210-F to their tax return. The form can be submitted electronically or on paper. The taxpayer’s name and identifying number should be entered at the top of the form, the waiver box (Part I, Box A) should be checked, and the rest of the form should be left blank.
Forms, instructions, and other tax assistance are available on http://IRS.gov.
Section 179 and bonus depreciation measures extended. Internal Revenue Code Section 179 allows farms and other businesses to write off small amounts of annual investments in capital assets, such as machinery, in the year of purchase in lieu of depreciating the investment over a number of years.
In the fiscal cliff legislation, the Section 179 deduction was reverted (increased) back to the old 2010/2011 level of $500,000 for 2012 and 2013.
This is a huge incentive given that up until this legislation was passed the 2012 limit was $139,000 and would have dropped to $25,000 in 2013.
Since this bill was not passed until the final hours, the increase to $500,000 for 2012 will most likely not help farmers unless they had purchased equipment in excess of $139,000 and had planned on just putting it on a regular deprecation schedule.
It should be noted that this deduction will revert back to $25,000 beginning in 2014. This legislation also extended the special 50% special depreciation allowance, also known as bonus depreciation, through the end of 2013.
The bonus depreciation provision generally enables businesses to deduct half the cost of qualifying property in the year it is placed in service. Bonus depreciation is now scheduled to be eliminated for the 2014 tax year.
Want to learn more?
I along with Dr. Chris Bruynis wrote a more in depth paper on this legislation for OSU Extension and this article can be accessed at: http://ohioagmanager.osu.edu. We are also offering a free farm tax webinar from 7 p.m.- 9 p.m. Feb. 6.
Farmers are encouraged to connect via the internet at home to learn the latest on farm taxes.
The following topics will be discussed during these two hour webinars: Farm bill extension, what does it mean?, Acre and SURE program updates, new income tax brackets (income and capital rates), section 179 extension and increase, special depreciation increase, payroll tax increase, filing status delay due to Form 4562, crop insurance and disaster payments, weather related sales of livestock, new federal income tax limitations, elimination of Ohio Estate Tax- 1/1/2013, CAUV tax increase explanation in counties across Ohio, oil and gas lease and royalty income, hunting lease income, and conservation easement deduction.
No pre-registration is required and producers can attend by logging in to: http://carmenconnect.osu.edu/ohioagmanager/.
This will be a great chance to learn more about the changes in agricultural taxes from the comfort of your home.
Closing comments
To close today’s column, I would like to share a quote from Winston Churchill who stated, “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
Have a good and safe day!
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