The Internal Revenue Service is reminding farmers and fishers about the March 1 deadline to take advantage of special rules that can allow them to forgo making quarterly estimated tax payments.
Anyone with income from a farming or fishing business may be able to avoid making any estimated tax payments by filing their 2017 return and paying the entire tax due on or before March 1, 2018. This rule generally applies if farming or fishing income was at least two-thirds of the total gross income in either 2017 or the preceding tax year.
Reduction in Medical Expense Deduction Floor – Basically for 2017 and 2018, the itemized deduction for medical expenses for taxpayers over 65 before the close of the respective tax year stays at those expenses over 7.5% of AGI, instead of limiting to expenses that exceed 10% of AGI. For taxpayers younger than 65, the 10% limitation stays in effect.
Limit on Deductions for State and Local Taxes – For tax years beginning after 12/31/2017 and before 1/1/2026, the deduction for foreign real property taxes eliminated and the aggregate deduction for individual state and local real property taxes, state and local, and foreign, income, war profits, excess profits taxes, and general sales taxes is limited to $10,000.00 ($5,000.00 for MFS) for any tax year. This will only affect those that itemize deductions and have combined state and local (and foreign) taxes that exceed the threshold.
Bonus Depreciation – The new tax law increases the bonus depreciation to 100% for qualified property that is both acquired and placed in service after September 27, 2017, and it establishes a new phase-down schedule for years after 2022.
The Internal Revenue Service today issued the 2018 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2018, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 54.5 cents for every mile of business travel driven, up 1 cent from the rate for 2017.
- 18 cents per mile driven for medical or moving purposes, up 1 cent from the rate for 2017.
- 14 cents per mile driven in service of charitable organizations.
The business mileage rate and the medical and moving expense rates each increased 1 cent per mile from the rates for 2017. The charitable rate is set by statute and remains unchanged.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.
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.
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.