Ahoy, land-lovers and cultivators of the earth! If you're a farmer, you're not just a master of the soil, but also a potential wizard of tax savings. Let's embark on a journey to understand how you can reduce that pesky tax bill and keep more of your hard-earned green (and we're not just talking about lettuce)! Farms may be considered a business. You are considered a farm if you cultivate, operate, or manage a farm for profit, either as owner or tenant. A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. Farmers under the Internal Revenue Code qualify for special tax benefits, yet not all agricultural producers meet the requirements. In addition to what you are growing, producing, raising, selling or extracting, it is also necessary to examine the facts and circumstances of the applicable tax issue to fully determine whether each tax benefit applies to each situation. For example a business could be split into a farm (reported on Schedule F) and a non-farm (reported on Schedule C unless incorporated). Take the example of a vineyard and a winery. The production of the grapes is a farm and reported on Schedule F. But lo and behold! When the grapes transform into something else, the sale of wine, juice or preserves would be considered non-farm and reported on Schedule C. There are many special tax benefits allowed for those who meet the definition of a farmer. It may be advantageous to consider adding a farm as part of a larger tax strategy; however, just like any business, the hobby loss rules apply. Someone not classified as a farmer may still be engaged in farming activities and have farm income. Some of the best benefits include deferred timing of recognizing farm income, not being required to maintain inventory and not being required to make quarterly estimated tax payments. To learn about these and other tax breaks for farmers, click here to continue reading.

The Treasury Department offers two types of federal savings bonds, Series EE and Series I, for individuals and businesses to invest in cash savings. Until 2021, federal savings bond rates were low; however, with the dramatic increase in inflation and interest rates, interest in federal savings bonds as a savings vehicle has skyrocketed. For example, in May 2023, TreasuryDirect issued $230 million in I bonds in that one month; in May 2020, only $13 million were issued. Federal savings bonds have very favorable tax features. At the federal level, the interest earned is generally tax-deferable and sometimes entirely excluded from tax. At the state level, the interest is always entirely excluded from tax. This article will review the differences between Series EE and Series I savings bonds and the tax savings opportunities available to owners of these bonds.

“Two men showed up saying they were from the IRS because I hadn’t paid my taxes. It scared me to death. Am I going to jail? Can they do that? I’m scared.” That is what the taxpayer blurted out as soon as I answered my business phone. Now before you say, “Timalyn, no way!” Yes, way! This was February 2020 when the world was still open, and the IRS was wide awake. Revenue officers were still on the phone making calls and showing up to businesses. Since the pandemic, many taxpayers, business owners included, have become lax in taking care of their tax obligations. This is due not only to many small and micro businesses still struggling financially, but also because the IRS has not been as aggressive the past few years. Business owners with employees are in a far more dangerous position if they have not kept up with their taxes. That’s why we’re going to look at one of the worst types of taxes to get behind on, payroll taxes. One of my mentors even refers to them as the “kiss of death” to business owners. The penalties for not paying payroll taxes can bury and put the nail in the coffin of most small businesses. Let me show you how these taxes can be the grim reaper. Let’s start from the top with what payroll taxes are and how the payroll tax penalties work.

Have you ever gone into a dealership to purchase a car? It’s been a while for me, but one of the things that keeps me from vehicle shopping is just how difficult it is to ascertain the actual price of the vehicle. The salesperson wants to run a credit check and then talk to you about how much payment you can afford. They want to factor rebates and trade-in value of your existing vehicle to the payment they quote you without ever telling you what you are paying for the car. The entire negotiation often becomes about the monthly payment (regardless of the term of the loan) rather than the car’s price. Indeed, personal finance websites almost always recommend negotiating the three aspects of your car purchase separately: the vehicle’s price, the trade-in amount for your vehicle, and the financing. Otherwise, you run the risk of both buying more car than you can afford and being upside down in the loan (owing more on the vehicle than the vehicle is worth) shortly after you make the purchase. What does this have to do with the expansion of the Residential Clean Energy Credit, you ask? More than you might think. My husband, after talking to a neighbor, recently decided to start shopping for solar panel systems with the idea of saving money on (or largely eliminating) our monthly power bills. What followed was a crash course in residential solar energy sales and the associated economics.

Question: I’ve heard other planners talk about using an accountable plan to reduce tax, but how exactly does this save a taxpayer money? Answer: An accountable plan is a type of reimbursement arrangement between an employer and employee that meets certain IRS criteria. It often covers business expenses that an employee incurs while performing their job, such as travel costs, home office expenses, or supplies. The way this plan helps save money on taxes is through the appropriate treatment of reimbursements or allowances under the tax law. Did you know that reimbursements for out-of-pocket expenses are taxable income? Normally, reimbursements for expenses are income, and the employee needs to pay income tax on them. However, if the expenses meet the criteria of an accountable plan, they’re excludable from the employee’s income. This means the employee does not have to pay income tax, Social Security, Medicare, or unemployment taxes on these funds. What about the case of partners in partnerships and shareholders in S-corporations? These individuals often face out-of-pocket expenses that the respective partnership or S-corporation doesn’t reimburse. Is there a way for these individuals to reap tax benefits for these expenditures too? There used to be. Under pre-TCJA rules, employees and owners of partnerships and S-corporations could deduct ordinary and necessary expenses, which were unreimbursed from the business as a Miscellaneous Itemized Deduction subject to the 2 percent floor. To learn how to make sure your S-corporation and partnership out-of-pocket expenses are deductible, and reimbursements are not taxable to the owners, click here to read on.

The tax research process continues to grow increasingly complex for numerous reasons. This article notes several of these reasons and offers tips for your tax research process to be sure you have the latest appropriate guidance for answering tax questions and taking properly supported positions on tax returns.

Section 183, which limits or entirely eliminates deductions attributable to activities not entered into for profit, may be coming in for more attention from an invigorated IRS. Section 183 is commonly referred to, not without reason, as the hobby loss rule. Based on my extensive study of the case law, I believe that practitioners widely misunderstand 183. I have noted cases where taxpayers had not gotten a heads up from their adviser. More commonly there is a misunderstanding of 183(d), a presumption in favor of taxpayers that is rarely relevant at all, but which the agency can never use against them. Most important is the failure to appreciate that it is the objective of making a profit not the expectation that is necessary. With that in mind here are the most recent developments...

“I’m going to get a pedicure later,” my wife said to me one Saturday morning. I quickly replied, “You should start an OnlyFans so you can deduct it.” (Everything has a tax angle when you’re married to a tax person.) “Is that really a thing?” she inquired. “Well…” I said, “It depends...” (Nothing is certain when you’re married to a tax person.) “...ordinarily I would say no, but in this case, it might be necessary.” (Everything is a tax pun when you’re married to a tax person.) In the “post” covid era, many taxpayers have turned to the gig economy. (Aside from the number of companies paying workers as contractors when they should actually be employees, but that’s a different topic for a different time.) Many of these gig workers are new to being self- employed and wonder what exactly they can “write off.”