An Update on Several Posts
After doing our last post on the IRS sending out letters to farmers on their 2018 tax returns, we received several more comments and emails indicating that this is happening across the country.
These notices will only apply if a farmer received a cooperative 199A DPAD. So far, we are not aware of any notices for farmers receiving the old 199 DPAD, even though that number does not foot on Schedule 1 either.
A couple of readers have asked us if they file an extension by April 15 for a farmer who normally files by March 1 will that extend the time for the underpayment penalty not to apply. The answer is no. If a farmer wants to have full relief from the normal filing date of March 1, they will need to file AND pay by April 15. If they get an extension, they will owe the penalty from January 15 to April 15 (or the date of payment).
However, if the farmer paid their required estimated tax payment on January 15 and pay the remainder of the tax with an extension by April 15, there is no penalty associated with that extension.
There also appears to be a rumor going around that the Market Facilitation Program payments are non-taxable. These payments are fully taxable and they cannot be deferred. The IRS had issued formal guidance indicating the payments are taxable. It would take an act of Congress to make them non-taxable.
The payments are not crop insurance and even if they were crop insurance, you can’t defer payments related to price. You can only defer these related to crop damage.
We have less than two weeks remaining in our tax season. This has probably been the most “interesting” tax season since the 1986 Tax Act came out (my wife knows when I use the word interesting it means I really don’t like something).
As predicted, we still don’t have any guidance from the IRS on how to handle the transition cooperative payments and even we get the guidance now, the tax software would not be ready by April 15. If you have not filed your tax return yet and you have a material amount of cooperative receipts, I would discuss filing an extension with your tax person now.
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.
Paul, we are of similar “vintage” as older CPA’s. My observation is that tax season #38 is the “most interesting of all”. The tax returns get completed just like cattle move through the chutes, one at a time. Good luck everyone!