CFAP Tax Treatment Project Team Overview
Explore insights into the CFAP Tax Treatment Project Team's initiatives, including information on CFAP program response to market disruptions, Schedule F examples, Form 1099 guidelines, consequences of not filing, and trust land exemptions.
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Presentation Transcript
CFAP Tax Treatment Project Team: Ruby Ward, Professor, Utah State University Trent Teegerstrom, Associate Director of Tribal Extension, University of Arizona Staci Emm, Extension Educator and Professor, University of Nevada Reno JC Hobbs, Oklahoma State University
CFAP Program Response to market disruptions from pandemic Designed to make you whole Replace lost revenue from market disruptions If payment replaces lost income, change in tax owed should be minimal We can help. We will have additional materials coming out.
Example Schedule F Part 1: Farm Income- Cash Method Line 2: Sale of livestock, produce, grains, and other products you raised 2019 2020 $40,000 $32,000 Line 4: Agriculture program payments (see instructions) $8,000 Line 9: Gross Income $40,000 $40,000
Schedule F Part 1: Farm Income- Cash Method Line 2: Sale of livestock, produce, grains, and other products you raised Example 2019 2020 $40,000 $40,000 Line 4: Agriculture program payments (see instructions) $8,000 Line 9: Gross Income $40,000 $48,000 Did you have other expenses? Haul water? Buy Hay?
Recipients will get a 1099 informational return. The IRS will expect to see the amount shown on the 1099 reported on Schedule F.
What happens if they dont file IRS will send a letter indicating they failed to report income on a 1099 (Notice CP 2000) The notice details the information needed to resolve the issue and the steps a taxpayer should take. Taxpayers have 30 days to respond.
Exemption for Trust Land If farm income has been exempt in the past, this should also qualify and be exempt Recipients will still need to file the return to avoid issues with IRS matching 1099 information
Weather-Related (Drought) Sales of Livestock: Income Tax Management Issues April 2021 J C. Hobbs - Associate Extension Specialist OSU Department of Agricultural Economics Oklahoma State University
Weather-Related Sales of Livestock Applies to sales of livestock due to weather-related conditions: flood, drought, or other weather-related condition causing a shortage of water and/or feed. Allows taxpayer to postpone recognition of income from the sale proceeds (avoids bunching of income).
Two Different Tax Treatments Both tax treatments or rules apply to sales in excess of normal or usual business practice due to weather-related conditions. The first applies to sales of any livestock (IRC 451(g) Deferral of Income for 1 Year). The second applies to sales of livestock (other than poultry) held for draft, breeding, or dairy purposes (IRC 1033(e) Involuntary Conversion).
1. Deferral of Income for 1 Year IRC 451(g) Applies to any livestock (including draft, breeding, or dairy animals) sold due to weather-related conditions. Sale proceeds (income) may be deferred to the next taxable year, however certain requirements must be met.
2. Involuntary Conversion IRC 1033(e) Must plan to purchase replacement draft, breeding, or dairy livestock within a 2 year period. (example, for sales in 2021, must replace the livestock by end of 2023). This rule does not apply to poultry or calves. Replacement period can be extended from 2 years to 4 years if the area has been declared eligible for disaster assistance by the Federal government or by one of its agencies.
To Learn More Please plan to attend a more in-depth presentation on this topic May 19th Farm Tax Basics 10 am PDT (11 am MDT) Tax Issues for Weather Related Livestock Sales 11 am PDT (Noon MDT) Additional information to be included
Resources Articles on RuralTax.org Taxability of Coronavirus Food Assistance Program (CFAP) Payments CFAPTaxTreatment.pdf (ruraltax.org) Disaster Losses and Related Tax Rules Weather-Related Sales of Livestock Available on RuralTax.org
Ruby Ward, Utah State University Ruby.ward@usu.edu JC Hobbs, Oklahoma State University Jc.hobbs@okstate.edu Trent Teegerstrom, University of Arizona tteegers@ag.Arizona.edu Staci Emm, University of Nevada Reno emms@unr.edu
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