Why Can’t I Defer my ERP Payment?
USDA has sent out almost $7 billion of Emergency Relief Program (ERP) payments and we continue to get questions from farmers about deferring these payments to 2023.
The bottom line is you can’t defer the payments. Let’s review the reasons why.
In order to defer crop insurance or federal disaster payments such as ERP you must meet the following steps:
- Be on the cash basis of accounting (almost all farmers are),
- Normally report at least 50% of your farm sales in the year after harvest (most farmers do), and
- Most importantly, collect the payment in the year of damage.
The last step is what prevents almost all farmers from being able to defer any ERP payments received in 2022. Since the payments to date are for damage incurred in either 2020 or 2021 you are technically receiving the payments after the year of damage.
There could be some farmers later this year that may receive payments related to damage incurred in 2022. In that case, the farmer may be able to defer, but that chance of this is slim.
The bottom line is report your ERP payments this year and do proper tax planning to reduce your income taxes by other means.
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.
Did all farmers receive the ERP payments? As I do not have any employees and when would I have received this payment? Thank you