Most farmers know that if they file their income tax return by March 1 of each year and pay the tax with that filing, there is no estimated tax penalty associated with not paying any estimated taxes through out the year.
What many farmers may not know is that filing this early might be creating a record keeping problem for them. These days, many of the form 1099's needed to file an income tax return are not received until late in February and in many cases, several corrected form 1099s are mailed during March. By filing on March 1, the farmer may end having to file an amended tax return and may get in such a hurry to get the return done, that many deductions might be missed.
One option is to pay their required income tax estimate due January 15, 2011. If their income for 2009 was much smaller than 2010 or they expect their income for 2010 to be fairly minor, the required estimated tax payment is normally the lessor of:
- 100% of the 2009 tax (if your income is high, this percentage may be higher), or
- 90% of the estimated 2010 tax
By making this tax payment, the farmer is allowed until April 15, 2011 to file and pay the remaining tax that might be owed without incurring any estimated tax penalties. With today's low interest rates, the amount of foregone interest might be very minor in return for the extra time to get the return filed correctly.
Please check with your tax advisor to see if this would work for you. You have 10 days to check it out.