Oct 27

IRS Grants Further Deferral of Livestock Sales due to Drought

Per an email received today from the IRS that I thought I should share:

If you are a farmer or rancher forced to sell your livestock because of the drought that affects much of the nation, special IRS tax relief may help you. The IRS has extended the time to replace livestock that their owners were forced to sell due to drought. If you’re eligible, this may help you defer tax on any gains you got from the forced sales. The relief applies to all or part of 48 states and Puerto Rico affected by the drought. Here are several points you should know about this relief:

  • Defer Tax on Drought Sales.  If the drought caused you to sell more livestock than usual, you may be able to defer tax on the extra gains from those sales.
  • Replacement Period.  You generally must replace the livestock within a four-year period to postpone the tax. The IRS can extend that period if the drought continues.
  • IRS Grants More Time.  The IRS has added one more year to the replacement period for eligible farmers and ranchers. The one-year extension of time generally applies to certain sales due to drought.
  • Livestock Sales that Apply.  If you are eligible, your gains on sales of livestock that you held for draft, dairy or breeding purposes apply.
  • Livestock Sales that Do Not Apply.  Sales of other livestock, such as those you raised for slaughter or held for sporting purposes and poultry, are not eligible.
  • Areas Eligible for Relief.  The IRS relief applies to any farm in areas suffering exceptional, extreme or severe drought conditions during any weekly period between Sept. 1, 2014, and Aug. 31, 2015. The National Drought Mitigation Center has listed all or parts of 48 states and Puerto Rico that qualify for relief. Any county that borders a county on the NDMC’s list also qualifies.
  • 2011 Drought Sales. This extension immediately impacts drought sales that occurred during 2011.
  • Prior Drought Sales.  However, the IRS has granted previous extensions that affect some of these localities. This means that some drought sales before 2011 are also affected. The IRS will grant additional extensions if severe drought conditions persist.”

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This is a tax-deferral, meaning that if you do not buy the replacement animals, you will still have to pay the tax. The concern I have for some of my estate and tax planning clients is that the price has skyrocketed since their initial sales in 2011-2012. This means that they sold an older cow/bull for about $800-$1,100 then and are now tasked with buying back a replacement at easily double that price. While the regulations and rules state that only the money value is what is taxed (and not the animal count), there is still little incentive to buy back half of what you sold.

The other problem that I see from this deferral is the fact that if you do not buy back the replacement animals when the “drought” ends, then you are supposed to report all deferred income back to the year of the initial deferral. This would mean amended returns for the first year and, most likely, amended returns for all years in between because of adjustments of losses, deductions, or self-employment taxes.

Keep in mind that the IRS doesn’t give away any “free lunches” and that this program is a deferment. Also, you should consult with your tax advisor or attorney on the long-term effects of any sale or deferral.

Oct 23

No COLA increase for Social Security

From an email I received from an advisor to the Oklahoma Department of Human Services:

For only the third time in 40 years, the nation’s elderly and disabled Social Security recipients will not receive an increase in benefit payments next year.  However, as a direct result of this about 30 percent of Medicare are facing a staggering 52 percent increase in their Part B premiums and all beneficiaries will see a similar hike in their deductible unless Congress or the administration acts to change things.

With consumer prices down over the past year, in large part thanks to low gas prices, there is no cost-of-living adjustment (COLA), meaning that monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 65 million Americans will stay at 2015 levels for 2016.  The average monthly Social Security retirement payment will remain $1,328 a month for individuals and $2,176 for couples. The maximum Social Security benefit for a worker retiring at full retirement age, which is age 66 for those born between 1943 and 1954, will also stay at $2,663 a month.

Other figures remain at 2015 levels as well, including the maximum amount of earnings subject to Social Security taxation and the income thresholds determining benefit reductions for those who retire early but still earn some income.  The monthly federal SSI payment standard will remain $733 for an individual and $1,100 for a couple.

Given the lack of a COLA adjustment for the nation’s elderly and disabled, some are calling for a re-thinking of how the cost of living for Social Security recipients is calculated.  It is currently based on the cost of a market basket of goods and services purchased by working people, who are younger and spend less on health care, which rises faster than inflation. Reuters columnist Mark Miller suggests changing the inflation gauge used for the COLA to the Consumer Price Index for the Elderly (CPI-E), which reflects the greater role of health care costs in spending by seniors.

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The fact that Social Security benefits are not rising means that most Social Security recipients who are also Medicare beneficiaries will not see an increase in their Part B premium, which has held steady at $104.90 since 2013.  By law, if Social Security benefits don’t rise, Medicare’s premiums can’t, either.  But this “hold harmless” provision does not apply to about 30 percent of Medicare beneficiaries: those enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $85,000 a year, and “dual eligibles” who get both Medicare and Medicaid benefits.

These unprotected Medicare beneficiaries are currently looking at their monthly Part B premium jumping to $159.30, while some high-income retirees could pay as much as $509.80 a month.  In addition, the Part B deductible for all beneficiaries would rise to $223 next year, from $147 in 2015.

Why are premiums going up so precipitously for these 30 percent of beneficiaries?  Because another law says that premiums must cover increases in Medicare costs.  With 70 percent of Medicare recipients shielded from any premium increase because Social Security benefits are not rising, the entire obligation of paying for the increased Medicare costs is falling on the other 30 percent who are not protected from premium increases.

If you are on a fixed income, or if you are looking for your parents, then these issues will be front and center as you make decisions for the next year. Now may be the time to plan for your estate as well as those long-term care costs. If you mention this post, I will give you a complimentary consultation to discuss your estate planning needs.

Sep 30

Drought-Stricken Farmers and Ranchers Have More Time to Replace Livestock

From the IRS, but I know that this applies to a few clients of mine, so I wanted to re-post here:

WASHINGTON — Farmers and ranchers who previously were forced to sell livestock due to drought, like the drought currently affecting much of the nation, have an extended period of time in which to replace the livestock and defer tax on any gains from the forced sales, the Internal Revenue Service announced today.

Farmers and ranchers who due to drought sell more livestock than they normally would may defer tax on the extra gains from those sales. To qualify, the livestock generally must be replaced within a four-year period. The IRS is authorized to extend this period if the drought continues.

We generika cialis use it for washing clothes, toothbrushing, and cleaning the bathroom and kitchen counters and sinks. However, it is an imperative for the tobacco companies to extend their empathy towards their wouroud.com buy cheap levitra loyal consumers by helping them know what exactly they are consuming. In the prostate, inhibition of 5-alpha reductase leads to a reduction generika cialis of prostate volume, which improves the symptoms of benign prostatic hyperplasia (BPH) and reduces the risk of prostate related-disease. viagra without There isn’t actually a tag called dofollow but it is a chewable candy form of the medicine. The one-year extension of the replacement period announced today generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes due to drought. Sales of other livestock, such as those raised for slaughter or held for sporting purposes, and poultry are not eligible.

The IRS is providing this relief to any farm located in a county, parish, city, borough, census area or district, listed as suffering exceptional, extreme or severe drought conditions by the National Drought Mitigation Center (NDMC), during any weekly period between Sept. 1, 2014, and Aug. 31, 2015. All or part of 48 states and Puerto Rico are listed. Any county contiguous to a county listed by the NDMC also qualifies for this relief.

As a result, farmers and ranchers in these areas whose drought sale replacement period was scheduled to expire at the end of this tax year, Dec. 31, 2015, in most cases, will now have until the end of their next tax year. Because the normal drought sale replacement period is four years, this extension immediately impacts drought sales that occurred during 2011. But because of previous drought-related extensions affecting some of these localities, the replacement periods for some drought sales before 2011 are also affected. Additional extensions will be granted if severe drought conditions persist.

Aug 17

Moving Expenses

From my IRS email this morning:

If you move your home you may be able to deduct the cost of the move on your federal tax return next year. This may apply if you move to start a new job or to work at the same job in a new location. In order to deduct your moving expenses, your move must meet three requirements:

1. Your move must closely relate to the start of work.  In most cases, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.

2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your prior job location. For example, let’s say that your old job was three miles from your old home. To meet this test, your new job must be at least 53 miles from your old home.

3. You must meet the time test.  You must work full-time at your new job for at least 39 weeks the first year after the move. If you’re self-employed, you must also meet this test. In addition you must work full-time for a total of at least 78 weeks during the first two years at the new job site. If your tax return is due before you meet the time test, you can still claim the deduction if you expect to meet it.

See Publication 521, Moving Expenses, for more information about the rules.

If you qualify for this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct certain transportation and lodging expenses while moving. This applies to costs for yourself and other household members while moving from your old home to your new home. You may not deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your property. This may include the cost to store or insure the items while in transit. You can deduct the cost to disconnect or connect utilities at your old and new homes.
  • Expenses you can’t deduct.  You may not deduct:
    • Any part of the purchase price of your new home.
    • The cost of selling your home.
    • The cost of breaking or entering into a lease.

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Jun 03

756 Days

It has been 756 days since the discovery of the IRS’s (specifically the Tax Exempt Organization division out of Cleveland) mishandling of tax-exempt applications by conservative groups. As of yet, all we know about is that relevant emails have disappeared and that as of yet, no one has been held accountable.

If you, as an audited taxpayer, tried to withhold the relevant information like the IRS officials, you would be held in contempt and face fines and penalties that would surely end any business you were trying to conduct.
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Isn’t it nice to know that our employees in the government are held to a different standard?