IRS Finally Updates RP Crop Insurance Deferral Options
For many years the IRS in Publication 225 (The Farmers Tax Guide) had indicated that farmers could not elect to defer crop insurance proceeds to the following year for revenue protection (RP) policies. We had mentioned this in a few other blog posts and in our farm tax update seminars.
It appears that the IRS has now gotten the message and updated this publication. The wording on this is found on page 12 in the middle of the left-hand column as follows:
“Proceeds received from revenue insurance policies may be the result of either yield loss due to physical damage or to decline in price from planting to harvest. For these policies, only the amount of the proceeds received as a result of yield loss can be deferred. Proceeds received from weather insurance policies cannot be deferred if the payment is based on rainfall amounts and is not a result of physical damage to a crop.”
This is good news since most farmers have elected to defer the yield portion of RP crop insurance policies for the last few years. Note that the language does indicate that the decline in price from planting to harvest cannot be deferred. Typically the crop insurance company will calculate this portion for the farmer.
A farmer still must meet the normal crop insurance election requirements to defer the yield portion.
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.
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