Thursday, January 31, 2013

TENSION BETWEEN SMALL FARMERS AND THE GOVERNMENT

Simon Owens, the author, of this article sent me his story about the growing tension between small farmers and the government and how this tension has created an unlikely coalition between liberal environmentalists and Tea Party libertarians. Let us know if you find it as interesting as we did:

Tea Party Libertarians and Small Organic Farmers Make Strange Political Bedfellows

INSURANCE CUTS FORESEEN IN NEXT FARM BILL


(Brownfield News) - BrownfieldAgNews.com reports, "Farm policy experts are expressing concern that continued delays in passage of a permanent farm bill are exposing the federal crop insurance program to potential budget cuts."  The story notes that during debate on the 2012 farm bill, some congressmen - and some farm groups - "supported placing limits on the amount of crop insurance premium subsidies that farmers can receive." 



 

Wednesday, January 30, 2013

GASOLINE TAX RATES BY STATE

The Tax Foundation released this map that shows the effective tax per gallon on sales of gasoline.

Friday, January 25, 2013

ARE WE MAKING TOO MANY ATTORNEYS?


There are too many law students. The Bureau of Labor Statistics estimates that the economy will create 21,880 new jobs for lawyers annually until 2020. But law schools produce more than 44,000 graduates each year. The Wall Street Journal

Thursday, January 24, 2013

DIVIDING THE SPOILS OF A SPOUSAL IRA

Q:  I retired in 2006, but my wife is still working. I'm now 66, and my wife is 62. We both have IRAs and we file a joint tax return. Can we both still contribute to our IRAs this year?

A: Yes. Since you qualify for a "spousal IRA" and you're both over age 50, you have until April 15 to jointly contribute up to $12,000 to your IRAs (assuming either of you earned at least that much in compensation during the year). That maximum $12,000 contribution can be divided among your IRAs in any manner in which you see fit as long as no more than $6,000 is allocated to either account. You have until your tax return due date to make the annual contribution.

TIP: To delay mandatory distributions from the IRA, allocate more of the contribution to the younger spouse.

NEW HIRE LETTER - NEBRAKSA

You may have received a letter from the State Directory of New Hires reminding you that you are required to report newly hired and re-hired employees.

Remember on October 21, 2011, President Obama signed the Trade Adjustment Assistance Extension Act of 2011. The law amends the term “newly hired employee” to mean an employee who has not previously been employed by the employer; or was previously employed by the employer but has been separated from such prior employment for at least 60 consecutive days. Nebraska’s new hire statute §48-2302 was amended to add this requirement which became operative on October 1, 2012.

The state uses the information to find people whom aren't paying child support; therefore the state knows where to garnish paychecks.

To find out more information you can check Nebraska’s website at: NEW HIRE

BUSINESS AND AG SALES TAX EXEMPTIONS IN EXCHANGE FOR NO INCOME TAX?


(Nebraska Radio Network) -- NebraskaRadioNetwork.com reports that Gov. Heineman's plan to eliminate most business sales tax exemptions, as well as sales tax breaks enjoyed by farmers, would allow elimination of the state income tax.  Gov. Heineman told reporters during the news conference: "We grant $5 billion in exemptions -- and if you just eliminate half of them, you eliminate the individual income tax and corporate tax."  The story notes that the largest sales tax exemption targeted in the governor's plan totals $1.4 billion -- the exemption of sales tax on ingredients and component parts used by businesses, including manufacturers.  "Another big-ticket item is the sales tax exemption on energy used in industry, which totals $122 million."  A number of sales tax breaks enjoyed by farmers would be eliminated, according to the article, including $87 million in exemptions for ag chemicals, and $82.1 million in an exemption on gasoline and diesel used in farming. 

To read more of this article: CLICK HERE



Tuesday, January 22, 2013

AG WEBINAR - CANCELED

Thank you for your interest in attending our webinar! We appreciate your business but unfortunately we are canceling  the Ag webinar scheduled for Wednesday January 23rd.

If we reschedule, we will notify you immediately. Again we are sorry for any inconvenience this may have caused you.

Friday, January 18, 2013

FARMER TAX RETURNS EXTENDED


The IRS announced today the extended processing time for many tax forms including form 4562 (Depreciation), that the deadline for any farmer and fisherman has been extended to April 15, 2013 from March 1, 2013.

To take advantage of the extended due date, the farmer will fill out form 2210-F (which they normally already due when filing on March 1) and check the waiver box and attach it to the tax return.  Nothing else will be required.

UPPER INCOME MAP BY STATE


We thought you might find it interesting to see a map showing the percentage of fliers in each state earning over $500,000.  The Fiscal Cliff compromise that passed a few days ago uses a higher threshold for most of the expired tax cuts - $400,000 (for single filers) and $450,000 (for joint filers.) The nearest threshold it's possible to do a map of IRS data with is $500,000, so below, by state, is a map showing the percentage of tax returns with adjusted gross income (AGI) over $500,000.

Thursday, January 17, 2013

CENSUS 2012- DO I HAVE TO DO IT?

We have been receiving calls and emails from our clients on whether they are required to participate in the Census Bureau business survey that was just sent out.

Our response: your business is required to participate in Census Bureau business surveys by law (Title 13, United States Code).

13 U.S.C. § 221: US Code - Section 221: Refusal or neglect to answer questions; false answers

(a)Whoever, being over eighteen years of age, refuses or willfully neglects, when requested by the Secretary, or by any other authorized officer or employee of the Department of Commerce or bureau or agency thereof acting under the instructions of the Secretary or authorized officer, to answer, to the best of his knowledge, any of the questions on any schedule submitted to him in connection with any census or survey provided for by subchapters I, II, IV, and V of chapter 5 of this title, applying to himself or to the family to which he belongs or is related, or to the farm or farms of which he or his family is the occupant, shall be fined not more than $100.

(b) Whoever, when answering questions described in subsection (a) of this section, and under the conditions or circumstances described in such subsection, willfully gives any answer that is false, shall be fined not more than $500.

(c)Not withstanding any other provision of this title, no person shall be compelled to disclose information relative to his religious beliefs or to membership in a religious body.

A FEW DAYS LEFT FOR IRA CHARITABLE ROLLOVER


If you are over age 70 1/2, you can save on last year's taxes by giving directly from your IRA this January.

In the 2012 Taxpayer Relief Act, there is a provision that is retroactive.

How?  With an Individual Retirement Account "IRA" Charitable Rollover, also called a "qualified charitable distribution."

What is an IRA Charitable Rollover?  An IRA Charitable Rollover is a direct transfer of up to $100,000 from your traditional IRA to a qualified charity.

Who is eligible to make an IRA Charitable Rollover?  Traditional IRA owners who are at least 70 1/2 years old.

How does an IRA Charitable Rollover benefit me?  Because the donation is made directly to charity, you benefit by not having to count the donated amount as income for tax purposes - this can be particularly helpful in excluding all or part of your required minimum distribution.

What if I already took my required distribution this year?  If you received a distribution between December 1, 2013 and December 31, 2012, you may donate all or part of that distribution by writing a check to your desired charity by February 1, 2013 and that donation will count as an IRA Charitable Rollover for 2012.

How long do I have to act?  You are allowed to make an IRA Charitable Rollover before February 1, 2013 and have it apply to your 2012 taxes.  You are also eligible to make an IRA Charitable Rollover for your 2013 taxes any time throughout 2013.

How do I make an IRA Charitable Rollover?  Instruct your IRA trustee to make the contribution directly to your designated charity before February 1, 2013. 

Contact us if you need further information.


WHY YOUR 2013 PAYCHECKS ARE 2% LESS


The questions are already rolling in: "Why did my pay drop?" The simple answer is the expiration of the payroll tax holiday as part of the fiscal cliff deal. The payroll tax holiday was enacted in 2011, which reduced the employee share of the Social Security payroll tax from 6.2% to 4.2%. The holiday was not renewed when it expired at the end of 2012. The payroll tax holiday proved popular, but it cut federal revenues by some $10 billion per month.

Friday, January 11, 2013

PAYROLL TAX INCREASES MAY SPOIL THE PARTY


I warned you that this was coming.

Despite the federal tax relief for taxpayers passed at the last minute, or actually after the last minute, payroll tax increases may spoil the party. As we have been warning you, the payroll tax reduction of 2% on employees that has been in place for 2011 and 2012 was allowed to expire on December 31st.

Lawmakers did not renew the two-percentage-point cut in the employees’ share of the Social Security tax. They did not like the idea that government funding was required to make up the decrease in tax revenue for the Social Security trust fund. As a result, they decided to let this break lapse. Thus, employees will see smaller paychecks as the rate returns to normal.

So the result of all of this…Since the cliff bill was passed the federal tax withholding stayed the same as in 2012 instead of going up, but since the 2% withholding of Social Security went up people will see 2% less in their 2013 paychecks.

NEBRASKA FARMERS SUBJECT TO UNEMPLOYMENT TAX


For Nebraska Farmers Only

Tina, one of our great CPAs, just sent an internal e-mail reminding us about the unemployment requirements for Nebraska farmers.  It thought it would be a good reminder to try and spread out your wages over the entire year rather than just waiting until the last quarter.

She had been keeping a close eye on farmer's payroll amounts that are going over the level and now qualify for unemployment ($20,000.00 cash and/or commodity wages in a quarter).  A list has been started and the plan is to sign them up on-line and then send out a letter letting them know what is happening and that they will now need to file this additional quarterly report.  She has found that it is both less time consuming and there is no worry about late forms if it is simply done on-line.  There is an amount due though, and the letters will have instructions about how much is due and where to send it.  She is planning on doing this in the next few days so if you get something in the mail from us be sure to look it over and call with any questions.

As you well know, once the farmer is subject the Unemployment tax, they must file reports quarterly.  When wages go under $20,000 in all quarters for two consecutive years, they will no longer be subject to the tax.

Thursday, January 10, 2013

FROM MY FAVORITE ECONOMIST - DR. ERNIE GOSS


I have heard Professor Goss speak many times.  He is a conservative economist and his commentary always seems to hit home.  I thought you might find his December commentary interesting. 


Is U.S. Adopting Europe's Anti-Competitive Economic Policies? Import French Wine, Not Economic Policy

Last week, Francoise Hollande, Socialist President of France, recommended homework be eliminated in French schools. He argued that assigning homework provides an unfair advantage to students with stable home environments. This same type of anti-competitive thinking has produced a social safety net in France and most of Europe that has undermined economic incentives and encouraged workers to remain unemployed or underemployed.   

For example, the World Bank estimates the annual cost of the social safety net as a percent of GDP in France is more than twice the size of that in the U.S. (graph). Not surprisingly over the past decade, France's unemployment rate averaged 2.6 percentage points higher than the U.S. rate, and the Gaullist nation's annual GDP growth was about one-third that of the U.S.    

Unfortunately, the Obama administration's proposed tax increases currently under deliberation by Congress on higher income, higher productivity and more highly educated workers pushes the U.S. in France's direction.  

The top five percent of wage earners, or those earning over $154,000, already pay an average income tax rate 11 times that of the bottom 50 percent of U.S. workers. Not only do Obama's tax rate hikes on the most productive Americans shrink incentives, they reduce the yearly budget deficit by less than 10 percent. Instead of diminishing the income of higher wage workers via elevated taxes, U.S. economic policy should be directed at raising the income of lower income workers. The U.S. should import French wines and movies, not French economic policy.

NOW WHAT DO FARMERS DO? IRS CANNOT PROCESS RETURNS UNTIL MARCH


Farmers are allowed to file their tax returns on March 1st to avoid the penalty for underpayment of estimates.  But there is a problem.  The IRS will not accept tax returns with depreciation until some time in March.  The IRS just released a notice announcing that processing of returns will commence on January 30, 2013 for most individuals.  More complex returns will not be accepted by the IRS until late February or even into March 2013 due to the complex changes in the IRS software system caused by last week's new tax law.

The notice mentioned specifically Form 4562 (Depreciation) will not be available until that time period.  We know that almost 100% of our farmers have depreciation reported on this form.  We are assuming that the March 1 farmer filing due date may get delayed by the IRS; however, they have not specifically mentioned that yet in an announcement.

In our pretax appointments, we have determined that this year may be a perfect time for farmers who normally file by March 1 to simply make their required estimated tax payment (lesser of 100% of 2011 tax or 2/3 of this year's estimated tax liability) on January 15.  This allows the farmer to file on April 15 and pay the remaining tax that may be owed then without any additional penalty.  On April 15th we can pay the estimated tax and file for an extension.  This gives us to October 15th to make some of the final decisions on the return.

With all of the changes associated with the new law and associated tax planning for 2012 and 2013, the extra 45 days may come in handy.

Friday, January 4, 2013

KOPSA OTTE ON THE FISCAL CLIFF


By now you’ve heard that Congress has passed legislation avoiding the tax increases of the “fiscal cliff.” In actuality it is more like a bungee jump off the cliff, because they dealt with the tax increase aspects of the cliff but not the deficit problem.  So, like a bungee jumper, they have hit the first bottom and now are back at the top ready to propel back down for the second half of the cliff. Few of us who watched the process would consider it Washington’s finest hour, but we finally have answers to the questions that have made proactive tax planning so difficult.

Here are the highlights:
  • The Bush tax cuts are restored for income up to $400,000 ($450,000 for joint filers). Rates for income above those ceilings rise to 39.6% for ordinary income and 20% for qualified corporate dividends and long-term capital gains. (There actually are six different capital gains rates, but more on that at a later time.)
  • The Alternative Minimum Tax is finally indexed for inflation retroactive to January 1, 2012, meaning Washington won’t need to “patch” it every year.
  • The estate tax “unified credit” amount that you can bequeath tax-free remains at $5 million, indexed for inflation. The actual rate rises from 35% to 40%.
  • The 2% payroll tax holiday has expired, most likely for good.
  • The higher expensing of equipment has been increased to $500,000 for both 2012 and 2013.  In addition, the 50% write off of new qualified business purchases in place for 2012 has been extended through 2013.

The legislation also extends several popular tax breaks like deductions for student loan interest, and tax-free charitable gifts made directly from Individual Retirement Accounts and several others that have been reported on by the news organizations.

We realize you’ve already heard this news. But we want you to know we’ll be studying the new law in the coming weeks and months to look for every opportunity to help you save. And of course, if you have any questions, don’t hesitate to call or email us.