What Patrons Need to Provide Their Tax Preparer
In previous tax filing years, most producers who were part of a cooperative simply provided a copy of Form 1099-PATR to their tax preparer and that was normally sufficient to prepare the tax return.
However, this year, the patron really needs to provide more information to the tax preparer. The cooperative is only required to provide the following information:
- A written notice of allocation of Domestic Production Activities Deduction (DPAD) to the patron. For calendar year 2018, the patron may have received two written notices. The first would be a notice of the old Section 199 DPAD which is reported on Form 8903 and is deducted above the line. The second would be a notice of the new Section 199A DPAD which is part of the new Section 199A deduction and is reported on the special 199A worksheet.
- Form 1099-PATR indicating patronage dividends, per unit retains, DPAD, etc. This form does not break down the allocation between 199 and 199A.
Although this is the information required to be provided by the cooperative, we actually need to get the following information from the farmer in order to prepare the income tax return:
- A copy of each written notice of DPAD allocation. We need each of these notices to properly report the 199/199A DPAD.
- A copy of Form 1099-PATR.
- A breakdown of the sales and patronage received from the cooperative from January 1, 2018 until the cooperative’s year-end. Many cooperatives may already provide this information to their patrons. If not, please review your detail of these payments or get a statement directly from the cooperative.
We need this information for each cooperative that you are a patron of and receive payments from.
Unlike previous years where the 1099-PATR was all we needed, this year will require more information. Start gathering it now.
For 2019, we may be able to return to only needing Form 1099-PATR to prepare your tax return.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
For 2018 there should be no 199A included on the 1099PATR because the fiscal year Co-op’s will still be still issuing DPAD in 2018 and the December year end Co-op’s will not have issued any notice of 199A deduction until 2019. Is that correct?
So if I am reading your various post correctly we will have to allocate the farmers income into three areas. Net income from non co-op activity, Co-op net income before the Co-op’s fiscal year end and Co-op net income after the Co-op’s fiscal year end. Is that correct?