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Tax Checklist

January 30, 2012
By: Sara Schafer, Farm Journal Media Business and Crops Editor
 
 

2012 programs and planning

Hopefully, your 2011 taxes are almost done and you’re ready to meet the farmer tax deadline, which is just around the corner. Several tax law changes for farmers went into effect in 2011, and the Internal Revenue Service (IRS) is intensifying enforcement of others.

For example, if you rent land, don’t forget to submit your 1099 forms to the IRS by Feb. 28. The forms are required for any landlords to whom you pay more than $600 in rent. David Marrison, an Ohio State University Extension educator who specializes in tax management, explains the IRS is tightening up on these forms "to make sure landlords are reporting the income they are receiving."

Marrison says two major adjustments are in place for 2012 taxes.

This past year, 100% bonus depreciation was available on new equipment to farmers on qualifying assets. For 2012, it has been lowered to 50%.

The other change is in Section 179, which allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. In 2011, the limit to write off was $500,000. For 2012, the limit is set at $125,000.

Marrison urges farmers to stay informed on these tax programs during the year. "The government has been trying to stimulate the economy for the past few years. Don’t be surprised if these programs are increased during the calendar year," he says.

The past few years have been highly profitable for farmers, and good tax management can help offset and maximize farm income.

Marrison encourages producers to weigh new purchases carefully.

"Before you buy new paint or steel, like grain bins or machinery, make sure that it will cash-flow, even if the market recedes. Don’t buy things just because the government is offering you special depreciation up front."

Online resources

Tax expert David Marrison says that with the ever-changing tax laws, you should find a good tax professional to assist you. "You want to be able to know how the tax changes affect your business and how you can make business decisions off them," he advises.

Use these resources to stay informed of changes and help you ask your tax professional the right questions.

Farmer’s Tax Guide

You can find this resource online or request a copy at your local Extension office. It provides a clear outline of tax changes and details how you should report farm assets, expenses, income and more.

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FEATURED IN: Farm Journal - February 2012
RELATED TOPICS: Farm Business, Taxes

 
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