Yes, tax season is snow storms, turkey dinner and college bowl games away, but having an eye on the tax prize in July can yield benefits in the winter months ahead.
Some facts to consider, while the audit rate at 0.59%, certain actions can increase that chance of getting the governments all seeing eye pointed at your return.
Businesses that show losses for a number of years, especially for farm, hobby like businesses and real estate ventures are perpetual targets of increased review. Farm operations should do everything possible to show a tax return once every five years with a positive net income or be prepared to show how the farm operation is truly its own enterprise and not just a tax shelter for off farm income. Those with letters behind their names at work should take note, whether those letters are J.D, M.D, CFP C.P.A, or D.O.
Despite the alarming number reported in the media, Chapter 12 bankruptcy is not on the increase, yet. The reported 75% increase in Chapter 12 Bankruptcy filings was 2 more filings than this time last year. While farm bankruptcy numbers aren’t up, those operating in the shadow of bankruptcy continue grow. The shadows are where things aren’t to litigation yet, but it is clear absent joint action, litigation is likely.
When it is clear that an operation cannot make scheduled payments? It is time to talk to the lender, not on the due date when it is clear that the payment can’t be made. The topics that need to be addressed and considered are
Those are the broad-based principles that need to be considered. In the application of these questions, the operation should consider the cash flow for each enterprise (grain, livestock. custom work) and identify what operation is stealing revenue and which ones are generating revenue. Interfamily operations should also be examined. Is the operation subsidizing a brother, a child, a parent’s operation intentionally or unintentionally? Consideration to the impact of missing your payment on their ability to continue is critical.
What is a reasonable ask to the creditor? While it is fact intensive and based on the prior performance of the relationship, creditors can make some concessions where it is appropriate. Things like, removal of delinquency fees and interest, re-amortization of debt over a longer period to reduce payments, foregoing collection activity for a set time period or agreeing to allow another creditor to step in “in front of” the creditor to provide operating capital to generate funds to pay the original creditor are all possibilities.
From the creditor’s prospective, they are concerned about ensuring they have their “ducks” in a row regarding financing documents and once they are secured in that regard, they generally seek the best opportunity to achieve the most recovery in the shortest time possible with the least amount of effort and capital spent to recover the asset. Almost always, the creditor will require a release indicating that the borrower isn’t going to receive concessions from the creditor and then turn around and sue them for violations banking law. This is not an indication that the creditor did something wrong, it’s just a wise business practice. Remembering that it is business and not personal is essential to a successful discussion with the creditor.
You have 100% chance of dying, we all do. Having a discussion while you are able to communicate your wants, needs, and desires with those who might be asked to make those decisions is as important as establishing a succession plan or making sure Aunt Millie’s china never falls into the hands of a Cardinals fan.
Communication about your own desires and what type of medical and emergency treatment you want, can relieve the confusion and anxiety that comes with a medical emergency for both yourself and all involved. Your age when you have this conversation is immaterial. People 18years old-88 years old should be able to discuss their thoughts on life changing events and how they desire them to be handled and who makes those decisions.
According to an AARP Survey, “More than 90 percent of people think that it is important to have conversations about end-of-life care with their loved ones, yet less than 30 percent have done so. Similarly, 70 percent of people say they want to die at home, but in reality, 70 percent die in hospitals or institutions."
Conversations between family members can help individuals understand and participate in the process. It will not be an easy conversation. It should not be started after the plates are cleared and before desert is served at the next family event. Here are some relevant things to kick around and discuss.
This type of discussion is a gift to give your loved ones and the ones you are asking to make decisions for you when you cannot. It will bring peace of mind and comfort for family to know that the decisions they may have to make are what you would want them to do for you.
Section 179 Tax Deduction
Why does a farm truck have to be so big? So that we can deduct it, that’s why.
The new law changed depreciation limits for passenger vehicles placed in service after Dec. 31, 2017
The following trucks and business vehicles qualify for 100% deduction
And new rules means that as long as its new to you and not purchased from a relative you can expense it right away.
Notice 4 door pickups and SUVS aren’t on that list. They need be heavy vehicles in order to maximize deduction opportunities Over 6,000 lbs.
. Absent invoking bonus depreciation, the maximum depreciation deduction is:
Other vehicle thoughts.
Your business vehicles should be titled in the business or in a separate entity that then leases to your business. Makes sense, right? How can an asset be listed on the balance sheet if the entity doesn’t have title to it, or at least the right to the title, and risk of loss? However, some insurance companies will now want to charge an additional premium for a business vehicle. This is a money grab silly as risk is based on use, not the name on the title in the glove compartment.
Take a look at how your vehicles are titled, who is an authorized user under the policy and where the vehicle is carried for tax purposes.
I cannot stress the magnitude of the poor of decision it is to lease a vehicle, particularly on business vehicles over $80,000. Vehicle leases are generally not capitalized leases and not eligible for 179 expensing.
The residual value offered on a 36-month lease will be about 60%.
The leasing company takes the degradation in value ($80,000 minus $48,000) and apply a capitalization rate of 8% to 12%. This is essentially your interest rate while leasing.
You must watch mileage limitations such as 10,000 miles per year with penalties for going over the limit. The Little old lady who just drives to church in rural Iowa probably gets 10K in mileage.
Sumner, Iowa Attorney practicing in Iowa primarily in Ag Law, Bankruptcy, Estate Planning, Real Estate Law. Lawyers at the Dillon Law P.C. are dedicated to serving Iowa, including but not limited to the cities of Allison, Charles City, Cresco, Decorah, Des Moines, Dubuque, Elkader, Grundy Center, Independence, Manchester, New Hampton, Waterloo, Waverly, Waukon, West Union & Vinton, and the communities that make up Allamakee, Benton, Black Hawk, Bremer, Buchanan, Butler, Chickasaw, Clayton, Delaware, Dubuque, Fayette, Floyd, Grundy, Howard, Polk, Winneshiek, counties. © 2022 Dillon Law P.C. Sumner Location | 209 E. 1st Street, Sumner, IA 50674 Volga City Location | 502 Washington St, Volga City, IA, 52077. West Union Location | 103 N. Vine Street, West Union, Iowa 52175 West Union, Iowa 52175 We are there most Fridays 10-3 and by appointment. Telephone: (563) 578-1850 Email: firstname.lastname@example.org Home | Attorneys | Blog | Ag Law | Bankruptcy | Estate Planning | Real Estate Law | Contact | Iowa Ag Law Attorney Sumner Taxation Commercial Transactions Production Contracts Labor Hobby Farm Liability Bremer Fayette County Lawyer