Don't Expect to File by March 1

Published on: 12:57PM Oct 19, 2018

The normal required estimated tax payment for a farmer is to pay only one payment on January 15, 2019 for the 2018 tax year.  The required payment is the lesser of:

  • 2/3rd of this year's estimated tax liability, or
  • 100% of last year's tax owed

However, many farmers take the other option which is to pay their income taxes and not incur an estimated tax penalty (although it is really an interest charge of about 5%).  As long as these farmers pay AND file their tax return by March 1, there is no requirement to make an estimated tax payment.

With tax reform still be vetted by the IRS, it is highly unlikely that the IRS will have their computer programs updated to allow for filing of most farmer's tax returns much before the middle of February and it may even be later than that.  Also, our ability to accurately prepare your tax return and file by March 1 may not be realistic.

There is a chance that the IRS will release a notice allowing farmers to wait until April 15 to file and pay and not owe a penalty.  But the best approach is to make your required estimated tax payment on January 15 and then you don't have to worry about the IRS issuing that notice.

In many cases due to very low prices for 2017, the required estimated tax payment could be a minimal amount.

Finally, this new tax law is extremely complicated and you will likely need to plan on paying an extra amount for your income tax preparation fee this year.  I can't tell you how much extra, but it could easily be 20-50% higher.  I am expecting to spend more time on calculation the Section 199A deduction for many of my farm clients than time spent on the rest of the return.  Please be prepared for this increase and if you are a long-time reader of this blog I think you can understand why the fee increase is necessary.