Publication 225 (2011), Farmer's Tax Guide
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Publication 225 (2011), Farmer's Tax Guide
For use in preparing 2012 Returns
Table of Contents
• Publication 225 - Introductory Material
◦ Introduction
■ Ordering forms and publications.
■ Tax questions.
◦ Future Developments
◦ What's New for 2012
◦ What's New for 2013
◦ Reminders
• 1. Importance of Records
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Benefits of Recordkeeping
◦ Kinds of Records To Keep
◦ How Long To Keep Records
• 2. Accounting Methods
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Accounting Methods
■ Cash Method
■ Accrual Method
■ Farm Inventory
■ Cash Versus Accrual Method
■ Special Methods of Accounting
■ Combination Method
■ Changes in Methods of Accounting
• 3. Farm Income
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Schedule F (Form 1040)
◦ Sales of Farm Products
■ Schedule F.
■ Form 4797.
■ Sales Caused by Weather-Related Conditions
◦ Rents (Including Crop Shares)
■ Crop Shares
◦ Agricultural Program Payments
■ Commodity Credit Corporation (CCC) Loans
■ Conservation Reserve Program (CRP)
■ Crop Insurance and Crop Disaster Payments
■ Feed Assistance and Payments
■ Cost-Sharing Exclusion (Improvements)
■ Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 200
■ Tobacco Quota Buyout Program Payments
■ Other Payments
■ Payment to More Than One Person
◦ Income From Cooperatives
■ Patronage Dividends
■ Per-Unit Retain Certificates
◦ Cancellation of Debt
■ General Rule
■ Exceptions
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Publication 225 (2011), Farmer's Tax Guide
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■ Exclusions
◦ Income From Other Sources
■ Sod.
■ Granting the right to remove deposits.
◦ Income Averaging for Farmers
■ Elected Farm Income (EFI)
■ How To Figure the Tax
■ Effect on Other Tax Determinations
■ Tax for Certain Children Who Have Investment Income of More Than $1,900
■ Alternative Minimum Tax (AMT)
■ Schedule J
• 4. Farm Business Expenses
◦ What's New for 2012
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Deductible Expenses
■ Reasonable allocation.
■ Prepaid Farm Supplies
■ Prepaid Livestock Feed
■ Labor Hired
■ Repairs and Maintenance
■ Interest
■ Breeding Fees
■ Fertilizer and Lime
■ Taxes
■ Insurance
■ Rent and Leasing
■ Depreciation
■ Business Use of Your Home
■ Truck and Car Expenses
■ Travel Expenses
■ Marketing Quota Penalties
■ Tenant House Expenses
■ Items Purchased for Resale
■ Other Expenses
◦ Domestic Production Activities Deduction
◦ Capital Expenses
■ Forestation and reforestation costs.
◦ Nondeductible Expenses
■ Personal, Living, and Family Expenses
■ Other Nondeductible Items
◦ Losses From Operating a Farm
■ At-Risk Limits
■ Passive Activity Limits
■ Excess Farm Loss Limit
◦ Not-for-Profit Farming
■ Using the presumption later.
■ Category 1.
■ Category 2.
■ Category 3.
• 5. Soil and Water Conservation Expenses
◦ Introduction
◦ Topics - This chapter discusses:
◦ Business of Farming
◦ Plan Certification
◦ Conservation Expenses
■ Water well.
◦ Assessment by Conservation District
■ Assessment for Depreciable Property
◦ 25% Limit on Deduction
■ Net operating loss.
◦ When to Deduct or Capitalize
◦ Sale of a Farm
• 6. Basis of Assets
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Cost Basis
■ Real Property
■ Allocating the Basis
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Publication 225 (2011), Farmer's Tax Guide
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■ Uniform Capitalization Rules
◦ Adjusted Basis
■ Increases to Basis
■ Decreases to Basis
◦ Basis Other Than Cost
■ Taxable Exchanges
■ Involuntary Conversions
■ Nontaxable Exchanges
■ Property Received as a Gift
■ Property Transferred From a Spouse
■ Inherited Property
■ Property Distributed From a Partnership or Corporation
• 7. Depreciation, Depletion, and Amortization
◦ What's New for 2012
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Overview of Depreciation
■ What Property Can Be Depreciated?
■ What Property Cannot Be Depreciated?
■ When Does Depreciation Begin and End?
■ Can You Use MACRS To Depreciate Your Property?
■ What Is the Basis of Your Depreciable Property?
■ How Do You Treat Repairs and Improvements?
■ Do You Have To File Form 4562?
■ How Do You Correct Depreciation Deductions?
◦ Section 179 Expense Deduction
■ What Property Qualifies?
■ What Property Does Not Qualify?
■ How Much Can You Deduct?
■ How Do You Elect the Deduction?
■ When Must You Recapture the Deduction?
◦ Claiming the Special Depreciation Allowance
■ What is Qualified Property?
■ How Can You Elect Not To Claim the Allowance?
■ When Must You Recapture an Allowance
◦ Figuring Depreciation Under MACRS
■ Which Depreciation System (GDS or ADS) Applies?
■ Which Property Class Applies Under GDS?
■ What Is the Placed-in-Service Date?
■ What Is the Basis for Depreciation?
■ Which Recovery Period Applies?
■ Which Convention Applies?
■ Which Depreciation Method Applies?
■ How Is the Depreciation Deduction Figured?
■ How Do You Use General Asset Accounts?
■ When Do You Recapture MACRS Depreciation?
◦ Additional Rules for Listed Property
■ What Is Listed Property?
■ What Is the Business-Use Requirement?
■ Do the Passenger Automobile Limits Apply?
◦ Depletion
■ Who Can Claim Depletion?
■ Figuring Depletion
◦ Amortization
■ Business Start-Up Costs
■ Reforestation Costs
■ Section 197 Intangibles
• 8. Gains and Losses
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Sales and Exchanges
■ Determining Gain or Loss
■ Like-Kind Exchanges
■ Transfer to Spouse
◦ Ordinary or Capital Gain or Loss
■ Capital Assets
■ Noncapital Assets
■ Hedging (Commodity Futures)
■ Livestock
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Publication 225 (2011), Farmer's Tax Guide
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■ Converted Wetland and Highly Erodible Cropland
■ Timber
■ Sale of a Farm
■ Foreclosure or Repossession
■ Abandonment
9. Dispositions of Property Used in Farming
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Section 1231 Gains and Losses
■ Nonrecaptured section 1231 losses.
◦ Depreciation Recapture
■ Section 1245 Property
■ Section 1250 Property
■ Installment Sale
■ Other Dispositions
◦ Other Gains
■ Exceptions.
■ Amount to report as ordinary income.
■ Applicable percentage.
■ Amount to report as ordinary income.
■ Applicable percentage.
10. Installment Sales
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Installment Sale of a Farm
◦ Installment Method
■ When to elect out.
■ Revoking the election.
■ More information.
■ Figuring Installment Sale Income
■ Payments Received or Considered Received
◦ Example
■ Section 1231 gains.
■ Summary.
11. Casualties, Thefts, and Condemnations
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Casualties and Thefts
■ Deductible losses.
■ Nondeductible losses.
■ Family pet.
■ Progressive deterioration.
■ Decline in market value of stock.
■ Mislaid or lost property.
■ Farming Losses
■ How To Figure a Loss
■ Deduction Limits on Losses of Personal-Use Property
■ When Loss Is Deductible
■ Proof of Loss
■ Figuring a Gain
◦ Other Involuntary Conversions
■ Condemnation
■ Irrigation Project
■ Livestock Losses
■ Tree Seedlings
◦ Postponing Gain
■ Exception.
■ Related persons.
■ Replacement Property
■ Replacement Period
■ How To Postpone Gain
◦ Disaster Area Losses
■ Who is eligible.
■ Covered disaster area.
◦ Reporting Gains and Losses
12. Self-Employment Tax
◦ What's New for 2012
◦ What's New for 2013
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Publication 225 (2011), Farmer's Tax Guide
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Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
Why Pay Self-Employment Tax?
How To Pay Self-Employment Tax
■ Replacing a lost social security card.
■ Name change.
■ Penalty for underpayment of estimated tax.
◦ Who Must Pay Self-Employment Tax?
■ Limited partner.
■ Community property.
◦ Figuring Self-Employment Earnings
■ Landlord Participation in Farming
◦ Methods for Figuring Net Earnings
■ Regular Method
■ Farm Optional Method
■ Nonfarm Optional Method
■ Using Both Optional Methods
◦ Reporting Self-Employment Tax
13. Employment Taxes
◦ What's New for 2012
◦ What's New for 2013
◦ Reminders
◦ Important Dates for 2013
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Farm Employment
◦ Family Employees
◦ Crew Leaders
◦ Social Security and Medicare Taxes
■ Religious exemption.
■ Wage limit.
◦ Federal Income Tax Withholding
■ New Form W-4 for 2013.
◦ Required Notice to Employee About Earned Income Credit (EIC)
◦ Reporting and Paying Social Security, Medicare, and Withheld Federal Income Taxes
■ Electronic deposit requirement.
◦ Federal Unemployment (FUTA) Tax
■ Reporting and Paying FUTA Tax
14. Excise Taxes
◦ Reminders
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Fuels Used in Farming
■ Buyer of fuel, including undyed diesel fuel or undyed kerosene.
■ Undyed diesel fuel, undyed kerosene, and Other Fuels (including alternative fuel).
■ Custom application of fertilizer and pesticide.
■ Fuel not used for farming.
◦ Dyed Diesel Fuel and Dyed Kerosene
◦ Fuels Used in Off-Highway Business Use
◦ Fuels Used for Household Purposes or Other Than as a Fuel for Propulsion Engines
◦ How To Claim a Credit or Refund
■ Credit only.
■ Claiming a Credit
■ Claiming a Refund
◦ Including the Credit or Refund in Income
15. Estimated Tax
◦ Introduction
◦ Topics - This chapter discusses:
◦ Useful Items - You may want to see:
◦ Special Estimated Tax Rules for Qualified Farmers
■ Qualified Farmer
■ Special Rules for Qualified Farmers
◦ Estimated Tax Penalty for 2012
16. How To Get Tax Help
◦ Low Income Taxpayer Clinics (LITCs).
Publication 225 - Additional Material
Index
http://www.irs.gov/publications/p225/index.html
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Publication 225 (2011), Farmer's Tax Guide
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12/18/2012