Sep 27

Drought-Stricken Farmers and Ranchers have Additional Year for Replacements

Announced from the IRS today:

Farmers and ranchers who previously were forced to sell livestock due to drought in an applicable region now have an additional year to replace the livestock and defer tax on any gains from the forced sales, according to the Internal Revenue Service. An applicable region is a county designated as eligible for federal assistance plus counties contiguous to that county.

This relief generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes. Sales of other livestock, such as those raised for slaughter or held for sporting purposes, or poultry are not eligible.

To qualify, the sales must be solely due to drought, flooding or other severe weather causing the region to be designated as eligible for federal assistance.

Under these circumstances, livestock generally must be replaced within a four-year period, instead of the usual two-year period. But in addition, the IRS is authorized to further extend this replacement period if the drought continues.

The one-year extension, announced today, gives eligible farmers and ranchers until the end of the tax year after the first drought-free year to replace the sold livestock.

I know a few ranchers that are clients that are still deferring from 2009-2011. The hard part for these replacements is that a cow during that period was sold for about $650-800. For the past few years, trying to get a similar replacement cost about $1,200-1,500. As the prices for replacements has gone down, now might be the time to get those deferments off the books.

Apr 26

Offers in Compromise

Taxpayers who have a tax debt they cannot pay may have heard that they can settle their tax debt for less than the full amount owed. It’s called an Offer in Compromise.

Before applying for an Offer in Compromise, here are some things to know:

  • In general, the IRS cannot accept a settlement offer if the taxpayer can afford to pay what they owe. Taxpayers should first explore other payment options. A payment plan is one possibility and must be looked at before an offer is made.
  • A taxpayer must file all required tax returns first before the IRS can consider a settlement offer. When applying for a settlement offer, taxpayers may need to make an initial payment. The IRS will apply submitted payments to reduce taxes owed.
  • The IRS has an Offer in Compromise Pre-Qualifier tool on IRS.gov. Taxpayers can find out if they meet the basic qualifying requirements. The tool also provides an estimate of an acceptable offer amount. The IRS makes a final decision on whether to accept the offer based on the submitted application.
Apr 24

IRS Issues Guidance on What to Do if you missed tax filing deadline

Tax day has come and gone for most people, but some taxpayers may still be dealing with their taxes. The IRS offers these tips for handling some typical after-tax-day issues:

Didn’t File by April 18?

There is no penalty for filing a late return after the tax deadline if the taxpayer receives a refund. Penalties and interest only accrue on unfiled returns if taxes are not paid by April 18. Anyone who did not file and owes tax should file a return as soon as they can and pay as much as possible to reduce penalties and interest.

“Where’s My Refund?”

The “Where’s My Refund?” tool is available on IRS.gov, IRS2Go and by phone at 800-829-1954. Taxpayers need specific information to use the “Where’s My Refund?” tool. That information includes the primary Social Security number on the return, the filing status (Single, Married Filing Jointly, etc.) and the amount of refund.

Changing Withholding?

Events – like a change in marital status – during the year may change the exemptions, adjustments, deductions or credits a taxpayer expects to claim on next year’s return. Employees can use the IRS’s online Withholding Calculator to figure and then adjust their withholding by filling out a new Form W-4, normally with the company’s personnel office. Taxpayers who do not have taxes withheld from their pay or don’t have enough tax withheld, may need to make estimated tax payments. Taxpayers who are self-employed normally need to make estimated payments that can be adjusted to avoid a balance due in the future.

Need to Fix an Error on a Return?

Form 1040X, Amended U.S. Individual Income Tax Return, must be filed by paper and is available on IRS.gov/forms at any time. Do not file an amended return before the original return has been processed. Taxpayers should file an amended tax return to change the filing status, or correct income, deductions or credits. The IRS generally corrects math errors and mails a request for any missing documents. Use “Where’s My Amended Return?” tool to track the status of your amended return. It will take up to three weeks after mailing the return to show up in the IRS system. Processing can take up to 16 weeks.

Watch Out for Scams

Aggressive and threatening phone calls by criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS will never contact a taxpayer via e-mail, text or social media. Any e-mail that appears to be from the IRS about a refund or tax problem is probably an attempt by scammers to steal information. Forward the e-mail to phishing@irs.gov. The first IRS contact with taxpayers on a tax issue will be by mail.

Jul 06

Oklahoma’s financial cost in losing Kevin Durant

I know that we as the Thunder nation are hurting over the loss of Kevin Durant as a player on the OKC team. But the impact of his leaving will affect more than just NBA fans.

As Oklahoma is an income tax state, the loss of Kevin Durant will result in an additional loss in revenue to our state coffers. A quick look at the estimates of the taxes he pays shows that this will not be an insignificant amount, either.

First, we would assume that he basically had to pay the maximum Oklahoma tax rate of 5.0% on all of his earnings.

His salary for actually playing basketball: $20,160,000. Loss in Oklahoma taxes of $1,008,000.

His endorsements this past year were estimated at $36,000,000. Loss in OK taxes of $1,800,000.

Estimated loss in revenue other businesses (ex. KD Restaurant) ~ $12,000,000. Loss in OK taxes of $600,000.

Just these added together will be a loss of about $3,400,000. Even this would go a long way towards teacher salaries (average in OK ~ $44,300), or towards roads, bridges, jails and other public services.

Additionally, we could assume that there will be a loss in city sales tax revenues in OKC with loss of sales of the merchandise with “35″. There may also be a loss of revenue in other OKC restaurants and hotels if the attendance at games decreases. Further, there could be a loss on taxes that the owners pay if profits for the team decrease. All of this just goes to show that professional sports are a big business and even if you don’t watch those sports and have no interest in them, it may still affect the services you receive from the state when the sport or one of the big players chooses to leave.

Feb 08

Nine Key Tax Tips for Farmers and Ranchers

The below 9 Key Tax Tips from the IRS email to tax professionals. Just a reminder that farmers, ranchers and fishermen have to have their taxes in by March 1, rather than the April 15 deadline for most filers.

1.  Crop insurance.  Insurance payments from crop damage count as income. Generally, you should report these payments in the year you get them.

2. Sale of items purchased for resale.  If you sold livestock or items that you bought for resale, you must report the sale. Your profit or loss is the difference between your selling price and your basis in the item. Basis is usually the cost of the item. Your cost may also include other expenses such as sales tax and freight.

3. Weather-related sales.  Bad weather such as a drought or flood may force you to sell more livestock than you normally would in a year. If so, you may defer tax on the gain from the sale of the extra animals.

4. Farm expenses.  Farmers can deduct ordinary and necessary expenses they paid for their business. An ordinary expense is a common and accepted cost for that type of business. A necessary expense means a cost that is proper for that business.

5. Employee wages.  You can deduct wages you paid to your farm’s full- and part-time workers. You must withhold Social Security, Medicare and income taxes from their wages.

6. Loan repayment. You can only deduct the interest you paid on a loan if the loan is used for your farming business. You can’t deduct interest you paid on a personal loan.

7. Net operating losses.  If your expenses are more than income for the year, you may have a net operating loss. You can carry that loss over to other years and deduct it. You may get a refund of part or all of the income tax you paid in prior years. You may also be able to lower your tax in future years.

8. Farm income averaging.  You may be able to average some or all of the current year’s farm income by spreading it out over the past three years. This may cut your taxes if your farm income is high in the current year and low in the prior three years.

9. Tax credit or refund.  You may be able to claim a tax credit or refund of excise taxes you paid on fuel used on your farm for farming purposes.

And one more I would add.

10. Farmers Tax Guidance.  You should work with a tax counselor throughout the year so you are able to gauge what may be owed and how to anticipate purchases and income as it relates to your taxable income.