1. Top 10 Tax Tips
Do you have the RIGHT
financial partner for your
farming, ranching or
agribusiness operation –
someone who understands
the agricultural industry?
Tammy Bryant & Julie Spiegel
785-537-2202
www.varney.com
2. 50% vs 100% Meals & Entertainment
• Generally, meals and entertainment are 50% deductible for tax
purposes
• However, there are exceptions which allow 100% deduction
• De minimis fringe benefits to employees (e.g. coffee, pop, etc)
• On-site meals for the benefit of the employer
• Recreation, social for benefit of employees (company picnic or holiday
party)
• Items made available to general public (snack bar)
• Groceries for hired labor
3. Commodity Wages
• Not subject to FICA or unemployment taxes
• Spousal employees paid in commodity wages reduces Sch F
net income and thus Self-employment tax
• Must relinquish control of commodity and must be clearly
identified so employee bears all risks
• Employer reports income and wage deduction at Fair Market
Value on date of transfer
• Employee reports capital gain on Sch D in year of sale of the
commodity
4. Farm Income Averaging
• Alternate tax computation on Sch J of 1040 for individual
taxpayers engaged in any amount of farming business
• Farming business includes sole proprietor, partner or S Corporation
shareholder – income, deduction, gain and loss
• Crop share rent qualifies but cash rent does not
• Wages of S Corp shareholder engaged in farming qualifies
• Gain/loss on disposition of property (other than land) qualifies
• Elective portion of current year taxable income from trade or
business of farming taxed at marginal rates applicable to prior
three years
• Only requires current year to be engaged in farming (not prior
years)
5. Depreciation
• Section 179 - $500,000 new or used with 15-year life or less
• 50% Bonus – unlimited new (only) with 20-year life or less
• Asset life
6. Employing your children
• Sole Proprietorship or disregarded entity (single member LLC)
• Must be under age 18, child of taxpayer
• Not subject to FICA or unemployment taxes
• C Corp or S Corp
• All employee service (including family members) is subject to all
payroll taxes
• Partnership
• All employee service is subject to all payroll taxes
• Exception for children if parents are only partners
7. Capital gains treatment
• Breeding livestock sales
• Raised breeding livestock held at least 24 months is eligible for more
favorable capital gains tax treatment (0% or 15% typically)
• Purchased breeding livestock subject to depreciation recapture and
taxed at ordinary gain rates
• Equipment sold at higher than original cost held for 12 months
• Ex: Equipment purchased for $20,000, depreciated over 7 years and
later sold for $25,000 results in $20,000 ordinary gain and $5,000
capital gain
8. Built-in gains (BIG) tax
• Assets that have appreciated in value within C-corp will be
double-taxed when sold (tax paid by corp and tax paid again
on dividend or wage to shareholder)
• An S-corp pays no tax; rather, the shareholder pays the tax
• If an S-corp was once a C-corp, there is potential BIG tax on
assets sold for the first 5 years of the S-corp (used to be 10
years)
• Examples of BIG:
• Unsold grain and raised livestock
• Prepaid farm expenses
9. 1099s
• Non-corporate entities paid $600 or more for rents (Box 1) or
services (Box 7)
• LLC’s always receive 1099’s for these services
• Exclude any payments made by credit card
• Payments to veterinarians related to a trade or business (Box
6-medical and health care payments)
• Form 1099s must be mailed to recipients no later than January
31
10. Unemployment tax
• Farmers are exempt from FUTA/SUTA if their business pays
cash wages of less than $20,000 per quarter and has fewer
than 10 employees
• Once subject to unemployment, remain subject going forward
• Federal and state unemployment rates vary
• Spouse, parent and children can be exempt from
unemployment if certain criteria are met
11. Kansas tax exemption on business
• Farm income, whether Schedule F, Form 4835 (crop share) or,
Schedule E (rental and pass-through business) is not subject to
Kansas tax in 2015
• But, losses from these can no longer offset other taxable
income
• However, if there is a net farm loss and Form 4797 livestock
gains, Kansas allows the livestock gains to be reduced to the
extent of the farm losses
12. Thank You!
Contact us today to
explore options on
becoming financial
partners. We look forward
to working with you!
Tammy Bryant & Julie Spiegel
785-537-2202
www.varney.com
