We have done a post on this already but continue to get some emails and feedback asking why a farmer can’t defer Phase 1 payments of the Emergency Relief Program (ERP) to 2023. These types of payments are similar to crop insurance and yes, they can normally be deferred one year but let’s review the three key requirements to defer crop insurance proceeds: Farmer is on the cash method of accounting (almost all are), Farmer normally reports more than 50% of total sales in the year after harvest (most do), and The farmer can only defer to the year after the damage was incurred. The last item is ..read more

It appears that the FSA is allowing farmers who currently do not meet the more than 75% farm AGI definition to appeal the determination with the local FSA office. Senator Hoeven released a press release on this process last week. We have not determined exactly how this process works. We have heard that you appeal it directly to the County Committee who then either pushes it up to the state level for review and then onto the federal office for further review or it skips the state office level review. We are not sure which farmers are eligible for relief. Since the FSA issues their updated guida ..read more

We had a feeling when we saw that ERP has already issued at least $6.4 billion of payments that USDA might not give us the result we wanted on equipment gains and that is the reality. USDA just released updated guidance on the definitions of farm adjusted gross income (AGI). The bottom line is that farmers needs to have at least 66.66% of farm AGI to total AGI before they can include equipment gains. This will prevent many farmers from qualifying for increased payments. Also, doing custom farming or harvesting services likley will have the same rule apply inlcuding providing seed to farmers. M ..read more

Now that President Biden has signed the Inflation Reduction Act of 2022, we can now dig into the details of the bill and how it might affect farmers. The Tax Provisions The bottom line for farmers is that there are very few tax provisions that will affect them. The Excess Business Loss (EBL) rules have been extended for another two years through the end of 2028. The EBL prevents farmers from deducting more than $270,000 /$540,000 against other income including wage income. The IRS is getting an additional $80 billion of funding that will be used to hire more auditors and hopefully update their ..read more

This post will do a little deeper dive into the Inflation Reduction Act of 2022 (IRA) that will likely become law this week. This post deals with the changes related to American Rescue Plan Act of 2021 provision to provide assistance to socially disadvantaged farmers. Eliminate Loan Forgiveness for Socially Disadvantaged Farmers The American Rescue Plan passed in 2021 had a provision to provide loan forgiveness for socially disadvantaged farmers plus an extra 20% to help pay for income taxes. This provision was immediately tied up in the courts and it appears that no funds were ever provided t ..read more

A scaled down version of the Build Back Better agenda of last summer passed the Senate Sunday and is now back in the House of Representatives for expected passage late this week. It then moves to the President’s desk for signature. The smaller bill is only 10% of the original bill the Biden Administration sought in 2021. Resolution of disagreement with Senators Manchin and Sinema led to the passage of the bill, with some late revisions required by Sinema. The tax increase provisions in the bill are directed at the wealthiest of Americans, but obviously will have a trickle down effect. To summa ..read more

First, I apologize for messing up the date on the last blog post for the webinar we did yesterday for the North Dakota Society of CPAs. Also, our service that sends out the post usually does it early the next morning after we do a post. However, lately, it sometimes takes an extra day which the case for this post. The good news is that there is a recording of the webinar avialable. It does not qualify for CPE but gives you the full recording. You can access the link to sign up here. We continue to try to help FSA update their rules on equipment gains and farm NOLs and will keep you posted ..read more

Please note the original post had it as of July 30. It is actually today, Wednesday June 29. Just an update. I will be doing a webinar for the North Dakota Society of CPAs on the FSA Emergency Relief Program (ERP) this Wednesday July 30 from 1 pm to 2:40 PM Central Time. Topics I will cover are as follows: A review of the FSA emergency relief program and why Farm AGI is important for our farmers. What is the current understanding of farm income for FSA purposes, not income tax purposes. There is a wide difference between these definitions. Practical examples explaining how the program works ..read more

I just got off of a webinar with the North Dakota CPAs and the North Dakota FSA office dealing with the Farm Adjusted Gross Income (AGI) issues that CPAs and Attorneys have been dealing with since the program was announced a few weeks ago. I wish I could say it is all good news but it is not. We will review the good news first and then go into (in great detail) the bad news. Who Files the FSA-510? Only an entity such as corporation or LLC is required to file Form FSA-510 unless any of the owners are also participating in the ERP including any indirect ownership. In that case, those owners woul ..read more

We have gotten many questions regarding what is considered farm income for FSA purposes. Farm income for tax purposes is fairly straight-forward. For FSA purposes, not-so-much. This post will have a series of Q & A’s that we have gotten and our current answers. Much of this topic is still unsettled since the guidance in the FSA Handbook 6-PL is not totally clear or has not been updated for tax law changes such as the Tax Cuts and Jobs Act. If we get further guidance from FSA, we will post ASAP. If gross receipts was used to meet the 75% test, we, as CPAs and tax preparers would have a much ..read more