Preparing You and Your Clients for Tax Season
It has been over 30 years since we last saw major tax reform. Here’s what to keep in mind this year, which varies slightly from previous tax seasons.
1. Plan on not filing by March 1. Many farmers automatically file and pay their income tax return by March 1. However, this year, it is likely much better to make your estimated tax payment on Jan. 15, and then file your income tax return on April 15.
The IRS is still finalizing the new law and related tax forms, which will make it extremely difficult for tax preparers to complete returns by March 1.
The required payment due on Jan. 15 is the lesser of:
• 100% of 2017 tax liability.
• two-thirds of this year’s expected liability.
If you miss it by a little bit, the penalty is based on the new 6% interest rate from Jan. 15, 2019, until the tax is actually paid. Here is an example:
Farmer Smith paid tax of $45,000 in 2017 and expects to pay $30,000 this year. He elects to pay $20,000 on Jan. 15. His final tax bill is $33,000, which is paid on April 15. The required payment was the lesser of $45,000 or $22,000 (2/3 or $33,000). The underpayment is $2,000 and the penalty is 6% of this number for three months or about $30. As you can see, the penalty was minor. If Farmer Smith had elected not to pay anything and file by April 15, the penalty would have been 6% of $22,000 for three months or about $300.
2. Remember your optional self-employment method. This year, many farmers who file a Schedule F tax return might show a large Schedule loss with an offsetting larger Form 4797 gain from trading in farm equipment. Farmers can no longer trade farm equipment and not report a gain. However, 100% bonus depreciation will allow farmers to deduct the trade-in amount and still report about the same amount of taxable income. However, this leaves the farmer with no earned income, which is required to provide for social security benefits.
Learn more from the Farm CPA Blogger
Learning to Listen to Plants and Collect Their Data
In the not-so-distant future, every plant in every field in every county in every state in this country will be sending waves of big data to our growers. Finding ways to better listen to plants will go a long way in protecting them from pests and diseases, but deciphering their language can be a challenge without the proper tools.
Electronic sensors attached to plants allow researchers to do just that: Listen to plants. On Dec. 3, North Carolina State University hosted its Stewards of the Future conference that brought in international experts on plant volatiles and communicating with plants with sensors. The experts at the conference agreed that sensors could be the next big thing in precision agriculture.
In the future they believe farmers will be able to use sensors to translate the language of plants and use that data to provide early warnings before damage from insects and other pests occurs. The research is still in its infancy, but progress is being made. Dr. Steve Lommel, associate dean for research at North Carolina State’s College of Agriculture and Life Sciences, considers sensors to represent precision agriculture at its best.
Learn more about sensor technology.
Is California Agriculture at a Political Tipping Point?
Could influx of younger residents to California and its political super majority in the state legislature make agriculture unsustainable in the Golden State? Two seemingly unrelated issues point to additional challenges for California farmers trying to sustain homes and businesses. On a national scale it suggests a potential tipping-point could be forthcoming as the country’s top ag-producing state adds to a populous with little-to-no understanding of farming and trade.
Last November Democrats gained a supermajority hold in the California Legislature while maintaining the party’s lock on the governor’s office. Meanwhile, data from United Van Lines in its annual mover’s study suggests that of those moving to California more are age 18-34 than any other demographic, with many of those new arrivals reporting incomes over $150,000. Conversely, over half of those leaving California were age 55 and older. Job changes were cited as the primary factor in leaving or moving to California though anecdotal reports suggest those fleeing dislike the politics of the state. Nearly two-thirds of those moving to California did so because of their job.
Neighboring Arizona gained most of its new residents in 2018 as the product of retirement while job opportunities forced the largest percentage of movers to leave the state. While California’s inbound and outbound numbers are more closely aligned, Arizona numbers revealed a 2:1 ratio of new residents over those leaving the state.
Read more about the leading farm state in the nation.
China's Approval of DowDupont Soy Poses Challenge to Bayer
China's approval of imports of a DowDuPont Inc genetically modified soybean puts rival Bayer AG on the defensive, investors and analysts said, as U.S. farmers will have a new choice when planting their most valuable agricultural export.
Bayer-owned Monsanto has long dominated the $40 billion U.S. soybean market. The market has opened up, though, as Monsanto's Roundup Ready line of seeds - engineered to tolerate the weed killer glyphosate - has lost effectiveness as weeds develop tolerance to the chemical. China cleared the way for U.S. farmers to eventually plant DowDuPont's Enlist E3 soybeans, which can resist three herbicides, by approving imports of the crop on Tuesday.
For years, the company had postponed launching the seeds while waiting for the nod from Beijing. China bought about 60 percent of U.S. soy exports, worth about $12 billion, prior to the ongoing U.S.-China trade war and could reject shipments of unapproved varieties.
Learn more.
President Trump, Fed Chairman Powell and Market Outlook
The next two to six months is a period of cautionary or conservative business practices, which will be followed by a throttle up growth period and rising demand for commodities.
Does friction really exist between President Trump and Fed Chairman Powell? Not really, but media noise has been intense.
Given global market uncertainties the President’s intensity and openness (though abrupt at times) serves as a market barometer signaling potential market volatility, trend, or simply a cautionary flag?
Fed Chairman Powell and the Fed Board members will verbalize monetary policy shifts and directional intentions, signaling all is well, caution is advised, or that an optimal risk management strategy is warranted. Their individual or collective signals are not always clear for several reasons because the outcome is not necessarily clear, which is why the Fed says we are data-dependent. Additionally, consumer and market participant confidence is all important to market stability.
President Trump and Chairman Powell, along with Congress, have specific responsibilities and leadership roles when it comes to fiscal, monetary, trade and regulatory policy.
Read more.
2018 Crop Insurance in Review
The following is a review by Jamie Wasemiller of the Gulke Group who is an expert on Crop Insurance and related topics including private products available that are often unknown or not discussed by the conventional insurance agent.
A positive thing I noticed in 2018 was that revenue guarantees were pretty good because we had good spring prices but also because individual APH’s are improving because we are starting to eliminate some of the lower yielding years that have burdened many of the 10-year APH’s. I would say that I have seen a bigger APH improvement in soybeans compared to other crops.
We also saw the expansion for a private product that shrunk the deductible by as much as 10% less than if just buying an MPCI policy. It became available in additional states and by additional companies in 2018 and will also be expanding in 2019
Learn more.
Lawmaker Repels Trump's Forest Funding Threat
Rep. Tom McClintock, R-Calif., asserts federal policies are largely to blame for severity of wildfires. President Donald Trump received what could be considered friendly fire on Wednesday after tweeting a threat to withhold federal wildfire relief funding for California because of what he considers poor forest management.
U.S. Rep. Tom McClintock, R-Calif., says he agrees with Trump that neglect of forests has worsened the severity of wildfires, but the conservative congressman lays much of the blame at the feet of federal agencies and environmental laws such as the Endangered Species Act and National Environmental Policy Act.
Read more.
FarmlandFinder Expands Into 11 Additional States
When Steven Brockshus launched FarmlandFinder in 2017, his mission was to help find farmland opportunities.
“Residential real estate has Zillow and the Multiple Listing Service. Commercial real estate has CoStar. What does farmland real estate have? We’re stuck with sale bills posted at a gas station and bookmarking individual land brokerage websites,” says Brockshus. “FarmlandFinder exists because land research shouldn’t be a time suck. Each year, $56 billion worth of land changes hands, and buyers and sellers have virtually no access to reliable, up-to-date information. We are tackling the challenge of getting access to quality land sale data, so growers and landowners can easily understand the market, quickly find land for sale, and see up-to-date land values.”
From an idea that was born while Brockshus was at a land auction, the online tool lets you view upcoming land sales, sale price records, sale transaction details, soil composition maps, and more.
FarmlandFinder provides actual sale results, not land value estimations, so you can make decisions based on real information. Unlike traditional listing websites that have limited land sale inventory, FarmlandFinder tracks land from 3,000+ brokerages to provide a comprehensive view of the market.
Learn more.
AARO Call for Presentations
Association of Appraiser Regulatory Officials (AARO) is hosting their spring conference in Denver, May 3 - 5, 2019. They are seeing proposals for presentations and looking for skilled presenters who can address issues and topics of interest to the appraiser regulatory officials that gather at the AARO conference.
See the flyer.