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Rick's Ag Roundup
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On Wednesday, Jan. 5, Dr. Bob Wolf from K-State Ag Engineering will be here to conduct a sprayer school at the old 4-H Grounds north of Great Bend on Highway 281. We will be in the big 4-H building with plenty of heat. Dr. Wolf is retiring soon, so this maybe the last sprayer event that we have for a long time.
Bob will talk about various nozzle tips and other keys to good application. We may have a farmer panel as well.
We will begin late morning. I will give the exact times later. We hope to have continuing education credits of 3 hours.
The cost will be $10 per person and that is just to cover the lunch and miscellaneous. Please let me know as soon as possible if you plan to attend so we can decide if it will be worthwhile. You can send me an e-mail at or call 620-793-1910 and leave a message.
While we are thinking about the holidays ahead, there’s one more thing to add to your to do list this holiday season: year-end tax planning. Although we had a wide range of yields, selling prices and input costs, many farmers had near record high incomes again this year. Isn’t that the way it goes? When workers and other small businesses were making money, farmers were going broke. Now that the rest of the economy is sagging, farmers (along with oil), are holding it together. However, when farmers are making money, the rest of the economy will eventually follow as the dollars flow through the community.
Here are some tax tips that I have gathered from the experts to help reduce your anxiety and possibly lower your tax bill. Keep in mind that President Obama just extended many tax cuts for the next two years so not all of these that I will talk about will be ending.
Before 2010, you could convert your traditional IRA to a Roth IRA only if your adjusted gross income was less than $100,000. For some farmers, this meant they could not take advantage of converting to a Roth IRA.
For 2010, however, you can convert your regular IRA to a Roth IRA without worrying about the $100,000 adjusted gross income limitation. Another nice feature for this year only is that the income from converting to the Roth is reported over two years, beginning in 2011. This means that if you convert $100,000 in 2010, you report zero income in 2010 and $50,000 each in 2011 and 2012.
You can also decide to undo the conversion by the due date of your tax return for 2010, which means that with an extension you have until Oct. 15, 2011, to decide if you really want to do the conversion or not.
Be sure to review your expenses for proper credits. Along with new credits added this year that may apply to farmers (see below), there’s an old one that you may have forgotten about.
There is a credit for those expenses related to agricultural chemical security enhancements. Any expenses incurred to properly store and use agricultural chemicals qualify for a 30% credit on your tax return. These expenses include security, computers and other related soft costs. This credit is usually claimed by the manufacturer or distributor of the farm chemicals. However, in many cases, the farmer can qualify for the credit. If you have spent or plan on spending money on enhancing the security of your farm chemicals, make sure to claim this credit as appropriate. As with most credits, you will need to add the credit back to arrive at farm income.
You can prepay for qualified farm expenses such as fertilizer, oil, diesel, seed, etc., at year-end. As long as the expense is a normal farm expense and has a business purpose, such as locking in a price discount, the deduction will be allowed. However, these types of expenses should be less than 50% of your overall farm expenses and you should always review these items with a tax professional.
On Sept. 27, President Obama signed into law the Small Business Jobs Act of 2010.
If you employ 10 or fewer employees and they earn on average less than $25,000 per year, you are allowed to claim a credit of 30% of the total health insurance premiums paid for your employees.
Farmers who hired unemployed workers after Feb. 3, 2010, and before Jan.1, 2011, can claim two credits:
* For payroll taxes paid after March 18, 2010, and before Jan. 1, 2011, farmers get a credit for the 6.2% FICA tax that they would normally pay on the employee’s wages.
* If the employee is still working for the farmer at the end of the year, the farmer qualifies for a $1,000 credit when filing a tax return.
* This new law extends bonus depreciation, extends and doubles Section 179 expensing, and also removes cell phones from listed property.
* The new law extends, through December 31, 2010, 50-percent first-year bonus depreciation, which had expired at the end of 2009. The extension is retroactive to January 1, 2010.
* The new law also extends, through 2011, an additional year of bonus depreciation allowed for property with a recovery period of 10 years or longer, and for transportation property (tangible personal property used to transport people or property).
* The new law also increases the maximum Section 179 deduction to $500,000 and the investment limit to $2 million for tax years beginning in 2010 and 2011.
One additional change that will impact farmers in this new legislation involves the removal of cell phones and similar personal communication devices from the current classification of listed property. This change effectively lifts the strict substantiation requirements of use and the additional limits placed on depreciation deductions.
Another pertinent tax-law change (not part of the Small Business Jobs Act of 2010) includes the expiration of the mandatory five-year recovery period for new machinery.
* Previous legislation mandated that for new farm equipment placed in service during 2009, a five-year cost recovery period was required. This provision of the tax code expired at the end of 2009.
* Basically, this means that farm machinery, regardless of whether the farm machinery is new or used, goes back to seven-year property for tax purposes.
Rick Snell is the Barton County Extension Agricultural Agent for K-State Research & Extension. He can be reached at 620-793-1910 or The Barton County Extension Office is located at 1800 12th Street in Great Bend.