Farmers should plan early for 2013 tax changes

Farms and other business have new tax rules to consider that will impact 2013 business plans.

The fiscal cliff created an opportunity for a number of changes in the tax rules and regulations related to when a farm must complete and file their annual income tax returns. For 2012 farm income tax returns, farms have been given an extension from the normal March 1, 2013, to file their tax returns without penalty until April 15, 2013 if they have not made estimates. Farms that elect to delay completing and filing their tax returns after March 1, 2013 will need to include a Form 2110F as part of their returns. The Form 2110F is a waiver that was part of the enactment of the American Taxpayer Relief Act (ATRA). To qualify, at least two-thirds of the taxpayer’s gross income must be from farming in either 2011 or 2012. Much of the guidance from the IRS is still in process do to the late enactment of ATRA after the end of 2012.

With farms in the Saginaw Valley having a large portion of the 2012 crop sales being in 2013, farms should see strong incomes again this year. Farms needed to do a much better job at planning the past few years to manage income levels and avoid a major spike that would trigger a substantial increase in farm income taxes. Looking at 2013, some of the changes that may impact farms putting together a farm business plan are:

As farms manage more gross income, the need for improved financial accounting systems and increased management of farm income becomes necessary. Michigan State University Extension recommends that farms consider financial management options like the Telfarm Farm Financial management system.

Information on agricultural tax topics can be found in the “Farmers Tax Guide,” publication 225. This publication along with others is available at from the IRS by calling the IRS directly at (800) 829-1040 or going to http://www.irs.gov. You can also find several tax related articles and helpful links by visiting the FIRM farm management webpage under the Tax Information Resource tab.