By Nicholas Bullock, EA
Sr Farm Tax Specialist with Yankee Farm Credit, ACA.
2020 is drawing to a close a difficult year. However, 2020 may also still have a tax surprise for many farms out there. The state and federal grants have helped many get through this tough year, but since those grants are taxable income they also could trigger a tax issue if not addressed through tax planning.
Another potential issue that may create an unforeseen tax problem is if you received a Payroll Protection Program Loan. Without further involvement from the legislature the current treatment for the loan is that it will be forgiven. If so, then the expenses that were paid for by the loan will not be deductible, as outlined in Notice 2020-32
from the IRS.
Through effective use of accelerated asset depreciation, farm income averaging, and pre buys of important business inputs a farmer can tax plan to minimize the impact the taxable federal and state grants will have.
The cold rainy days of November and December are a great time to catch up on the business records, so an accurate projection of the year can be analyzed. Reach out to your tax professional to help guide you through this turbulent time.
We offer a wide range of record keeping and tax planning services that you can take advantage of at any time. If you are looking for assistance with your business, contact us, we would be happy to work with you.