Thursday, August 30, 2012

PER THE KANSAS CITY FED, EXPECTATIONS FOR FARM INCOME DROPPING RAPIDLY


For those states comprising the Kansas City Federal District (Nebraska, Mountain States, Kansas, Missouri and Oklahoma), the expectations for farm income have dropped dramatically due to the drought.  The district just released report on the second quarter agricultural credit conditions.

The report presented a chart of actual income versus expected income by quarter from 2004 to now.  

This district has substantial livestock operations so the high cost of feed is more negatively impacting farm income than perhaps other reporting districts.

Farmland prices have increased dramatically from a year ago.  Nebraska leads the pack with a 36.5% increase in non-irrigated land, with some of the other states not too far behind.  However, expectations going forward is for flat farmland values for the next year or so due to the drought.  Also, there is probably some “fatigue” setting in from the rapid appreciation in values.
 
 

USDA REPORT ON FARM GROWTH


Every paper has reported on the increase in farm income increase by 3.4%.  I won’t rehash those well written articles but, I thought you might be interested in the actual report. 

To view the USDA Report: CLICK HERE

PIG WINGS


Americans love chicken wings. Last year they ate three billion pounds of the sauce-covered poultry products. Buffalo Wild Wings, a Minneapolis-based restaurant chain that specializes in wings, has a market cap in excess of $1 billion. Great Sea of Chicago, makes Korean-style wings that are so addictive they have wall of fame for most wings consumed by one person in a sitting. (The record is 90.)

Americans also love pork. More than 80% of households eat "the other white meat." Bacon is so beloved it is being added to everything from vodka to ice cream and body fragrance.  I have a great client (fargginay) in Chicago that sells a cologne called bacon.

Now “Pork Wings” are catching on.  Some people seem to be passionate about the new “pork wings."  These passionate consumers are called "Pork Dorks."

This new use of pork is apparently being launched by Farmland Foods, a division of Smithfield Foods.  They are in the midst of transforming Farmland Foods from a supply/commodity company into a demand-driven innovator.  Pig wings are one of many examples of what Farmland is attempting. (Others competitors like Pioneer Meats also market them.)

The product itself is a delicious cut of pork (which butchers know as the "shank," a part of a pig's leg) that you can eat with your hands like a chicken wing. A review of pig wings describes them as, "surprisingly tender and juicy, pulling clean off the bone." Think of it as a meatier, less messy version of a pork rib. It is becoming so popular that the New York Times did a review of the new delicacy.  I have not seen “pig wings” yet, but restaurants who serve pig wings say consumers love them.

Wednesday, August 29, 2012

RENTING PROPERTY TO YOUR CORPORATION MAY HAVE UNEXPECTED RESULTS


Renting property to a corporation you own may not get you a tax break.

You can’t always use the net rental income to offset other passive losses, as demonstrated by this case where a man set up two pass-through businesses to lease tractors and trailers to his corporation.

Because his firms rented property to a closely held corporation in which he worked more than 500 hours per year, that triggered a special rule that treats the net rental income as nonpassive income. Although many of the rentals were profitable, some produced losses. Nevertheless, the Service recharacterized only the net rental income (Veriha, 139 TC No. 3).

Friday, August 24, 2012

TEN TAX TIPS FOR INDIVIDUALS SELLING THEIR HOME


The Internal Revenue Service has some important information for those who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may be able to exclude all or part of that gain from your income.

Here are 10 tips from the IRS to keep in mind when selling your home.

1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.

2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

3. You are not eligible for the full exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

4. If you can exclude all of the gain, you do not need to report the sale of your home on your tax return.

5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.

6. You cannot deduct a loss from the sale of your main home.

7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.

8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

9. Special rules may apply when you sell a home for which you received the first-time homebuyer credit. See Publication 523, Selling Your Home, for details.

10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.

For more information about selling your home, see IRS Publication 523, Selling Your Home. This publication is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).


Thursday, August 23, 2012

YEAR-END PLANNING: MAKING THE MOST OF QUICK WRITE-OFFS FOR CAPITAL GOODS


Although bonus first-year depreciation and more-generous Code Sec. 179 expensing limits have been extended before, another lease on life for these tax breaks is far from certain this time around.

Unless Congress acts, additional depreciation deductions under Code Sec. 168(k) in the placed-in-service year equal to 50% of the adjusted basis of qualified property won't be available after this year.

Also, the Code Sec. 179 expensing limit is set to plummet to $25,000 for property placed in service next year.

Because of this uncertainty, business owners planning to purchase machinery and equipment during the remainder of this year or early the next should try to accelerate their buying plans, if doing so makes sound business sense.


FRUSTRATION OVER FARM BILL BUILDS


(Nebraska Radio Network) -- NebraskaRadioNetwork.com reports, "Nebraska's Congressional delegation dealing directly with agriculture legislation expresses frustration that a new Farm Bill hasn't passed Congress."  The current farm bill expires this year.  The current law, which includes authorization for more than $80 billion worth of food stamp and nutrition programs, expires Sept. 30.  "Congressman Jeff Fortenberry, a member of the House Agriculture Committee, isn't sure a Farm Bill will pass this year" and that "Congress might be forced to extend the current policy for a year."

To read more of the article: CLICK HERE

DROUGHT WEIGHS ON NEBRASKA BANKERS' MINDS


(Norfolk Daily News) -- NorfolkDailyNews.com reports that Nebraska's community bankers are concerned about the impact the 2012 drought on agriculture's future.  According to the article, Clark Lehr, president and CEO of First National Bank in Columbus and chairman of the Nebraska Bankers Association, says "both the banker and the producer are trying to be cautious and not overreact." John Stinner, president and CEO of Valley Bank & Trust Co. of Gering and president-elect of the NBA, says the drought "could impact long-term" Nebraska's banking industry, noting there is a concern about loan demand.

To read more of the article: CLICK HERE


Friday, August 17, 2012

THE INTERNET RUMORS ARE NOT TRUE - MOST HOUSE SALES ARE NOT SUBJECT TO THE 3.8% MEDICARE TAX



The impending 3.8% Medicare surtax has fueled a spate of chain e-mails regarding a federal "real estate transaction tax" on home sales, and I have been hearing from worried clients.

Here are the facts:

Gain on the sale of your house is not taxable unless your gain is greater than $250,000 for singles or $500,000 for married taxpayers.

That's the facts Jack.

AG TAX 2012

Last Thursday (08.16.12), we sponsored our 21st Ag Tax Update at the Chances R restaurant here in York. Nice turnout and some of great clients attended. During the program, we discussed many of the important issues that are happening (or not happening) in Washington D.C. The only problem was during the morning session I talked about the upcoming “Tax Armageddon”, the AMT problem and Obama Care therefore most participants became depressed. One attendee emailed me over the weekend and apologized for leaving at noon as he stated that he was frustrated so he went home.
Our Ag Tax Update is one of our many efforts to keep our clients informed on their tax and estate options and the changes in the laws so that they can avoid the “tax landmines.”
If you have any questions or would like a copy of the PowerPoint that was shown during the update please let Amanda from our office know.

Thursday, August 16, 2012

TAX LAW CHANGES THIS YEAR


This year Congress has passed 54 bills and sent to the president the following:
       14 to rename post offices
         9 to approve real estate transactions
         6 to renew existing leases


Wednesday, August 15, 2012

DO OLYMPIC ATHLETES PAY TAX IF THEY WIN GOLD


In response to exaggerated figures floating around the web, Snopes.com has an interesting look at the income tax consequences for those who win medals in the Olympics. Click here for article.

Basically, the winners do report the cash prizes they receive as income; but their deductible expenses to train, and attend the Olympics would most likely be more than enough to cancel out that income on their tax returns.


Thats the facts Jack.

Saturday, August 11, 2012

QUICKBOOKS SETUP ERROR & HOW TO FIX IT #3


Most errors can be avoided simply by planning your setup and knowing what your business needs are. Here is another QuickBooks setup error that we see the most AND how to fix it.

Vendors

Redundant or duplicate: The same as with the Chart of Accounts, you don’t want bloated Vendors list. So periodically review the list for duplicates and merge the Vendors.

Vendors properly not set up for 1099 reporting: Check with your accountant/tax profession regarding the necessary paperwork and filing requirements but you can (and should) track 1099 amounts in QuickBooks. When done properly, year-end 1099 filing is simple.

Remember, standing in a garage, doesn’t make you a car… knowing a bit about QuickBooks and being able to navigate it, does not make you an accounting expert. Don’t be afraid to look for or ask for some help.

Friday, August 10, 2012

IT IS NOT THE 1% THAT TIS STRANGLING THE ECONOMY

Everybody should have a favorite economist. Mine is Professor Ernie Goss of Creighton University.  The following is from his July newsletter:


It's not the 1 percent that is siphoning U.S. economic resources. It is the 25 percent--the portion of the U.S. population born between 1946 and 1964 or, baby boomers like me. Not only are we 25 percenters leaving the workforce at very high rates, (consuming instead of producing), we are draining the U.S. Treasury via higher Social Security (SS) benefits and greater Medicare spending. Over the past decade, SS outlays soared by 69 percent and Medicare expenditures rocketed by 135 percent, enlarging the nation's debt to $16 trillion.
This debt which is the largest in the galaxy and 100 percent of GDP will ultimately be paid for by the 60 percenters (those born after 1964). We need to take steps to reduce this wealth transfer from young to old by: (1) raising the SS retirement age from 67 to 70 by increasing it 2 months per year, (2) increasing the Medicare eligibility age from 65 to 67 and, (3) cut the yearly SS inflation adjustment by 1 percent. Taking these actions would save $360-$400 billion between 2012 and 2021. Additionally to reverse the aging of the nation’s labor market, the U.S. should expand legal immigration allowing younger workers and their families to enter the U.S. Latest U.S. Census data show the median age is 38.3 for Whites, 35.3 for Asians and 27.4 for Hispanics. By increasing legal immigration and slowing the growth in SS and Medicare spending, the U.S. would avoid the stagnation and looming economic calamities threatening Japan and Europe as a result of their aging populations and expanding pensions/healthcare payments to baby boomers. Ernie Goss.

I found his comments on a “fix” to the deficit that the Social Security fund very interesting.  Last fall, I attended the National Tax Conference in Washington D.C.  One of the sessions was on Social Security and Medicare, the speaker, Theodore Sarenski echoed some of the advise that Dr. Goss presented.  If this happened, according to Sarenski, no person over 55 would be see their benefits change and people under 55 would still receive at least 85% of their benefits. 

Thursday, August 9, 2012

LOOPHOLE - A ROSE BY ANY OTHER NAME WOULD SMELL THE SAME


I was recently speaking about taxes at a convention in Orlando, Florida. After my session one of the participants came up and said that he did not like my reference to a few of the tax "loopholes." He felt that a loophole was a shoddy idea that was on the verge of something that was illegal.

That conversation got me to thinking. "Loopholes" is one of those words with different connotations for different listeners. To some, it's a dirty word — I've seen editorials calling the exclusion for employer-provided health insurance a "loophole," and making it clear that a "loophole" is one small step removed from out-and-out graft. Others of us love it. In fact, from time to time I refer to myself as "Loophole Larry."

My understanding of the word "loophole" has always been a law that's passed for one purpose that gets used for another —sort of like when a doctor prescribes a drug for off-label use.

My favorite example is Code Section 132(j):
(4) On-premises gyms and other athletic facilities
       (A) In general- Gross income shall not include the value of any on-premises athletic facility provided by an employer to his employees.
       (B) On-premises athletic facility - For purposes of this paragraph, the term 'on-premises athletic facility' means any gym or other athletic facility -
          (i) which is located on the premises of the employer,
          (ii) which is operated by the employer, and
          (iii) substantially all the use of which is by employees of the employer, their  spouses, and their dependent children (within the meaning of subsection (h)).

Do you have a home-based business? Do you or any of your family qualify as employees? Do you have a pool in your backyard? Congratulations! You've got a tax-deductible on-premises employee athletic facility!

Now, we all know Washington didn't pass that law to let folks like us write off our swimming pools, treadmills, or elliptical machines. They passed it to clarify that when Corporate America sticks a gym in the basement of his big glass tower, his employees don't get stuck with taxable income for working out instead of taking lunch.

But clever planners like us take a law that was passed for one purpose, and explore it to the fullest definition. If a big employer can deduct the money it spends providing a swimming pool for its employees, should a small employer not be entitled to the same opportunity? For some, it's a "loophole" and for others it's a "strategy." Either way, it takes astute planning to take a law that was passed for one purpose and use it for a slightly different but honest and defensible purpose.

So I've never shied away from promoting "loopholes" as something my clients should want to take advantage of.

So if we want to get technical, Dictionary.com defines "loophole," in part, as "a means of escape or evasion; a means or opportunity of evading a rule, law, etc.: There are a number of loopholes in the tax laws whereby corporations can save money." Is that the same as the understanding I just outlined? Nope. Is it a pejorative? Not to me, but I see how it is for others.

So, what's our bottom line here? My job is to point out alternatives to my clients. Let them know the color (black, white, or gray), but don't let them not follow the law.

I try to throw in a quick definition when we use those terms. For example, I might tell a client "when I say 'loophole,' I mean a law that Congress passes for one purpose that gives someone else an unintended benefit. It's perfectly legal, even if Washington didn't realize that's how we could use that law."

NEBRASKA LEADS STATES IN INCREASED CROPLAND VALUE

(AP/SacBee.com) -- The AP reports, "The value of an acre of Nebraska cropland rose more than any other state over the last year."  According to the USDA, cropland in Nebraska climbed nearly 36% to $4,480 an acre on average. "Farm real estate, which includes all land and buildings on farms, was up 33.5% in Nebraska, again the highest increase."

To read more of the story: CLICK HERE

Friday, August 3, 2012

MEDICAL PREMIUMS - W-2

Q: Larry, I heard for someone that we are going to have to put any medical/dental premiums that we pay for our employees on the W2s starting this year. Do you have any information about this or know where I would be able to look that up? We just want to make sure that we have it covered sooner rather than later.
A: As long as a business had less than 250 employees in 2011, then there is relief, in that, there will not be a requirement to report in 2012.
To see Q and A sheer on IRS website: CLICK HERE

CLARIFICATION OF DEDUCTION OF MEDICARE EXPENSES


Until about 2009, the IRS position was that a self-employed taxpayer (including partners and more than 2% S corporation shareholders) could not deduct Medicare premiums above the “line” as part of the self-employed health insurance deduction. In 2010, the instructions for form 1040 and other related forms had added a section indicating you could deduct these premiums above the line. The problem was that there was no actual formal announcement from the IRS just a change in the instructions.

We picked up on this right away and started deducting the Medicare premiums as a adjustment to gross income on page one of the return. Now, over two years later, the IRS announced a formal change in the long-held position on the detectability of Medicare premiums (normally withheld from Social Security Benefits), which in most part agree with the 2010 instructions.
Take note that for S corporation shareholders and partnerships, a notice issued previously by the IRS requires that these premiums actually be reimbursed by the corporation (or paid directly by the employer, which is not normally applicable with Medicare premiums). This requires a check be issued by the employer to the employee paying the Medicare premiums. These payments would then be included in the income of the employee (deducted by the employer) and then deducted on page 1 of form 1040 of the employee. If these guidelines are not followed completely, then the deduction is not allowed.

Thursday, August 2, 2012

FEDERAL STUDENT AID NEW WEBSITE


Federal Student Aid launched a new streamlined website, StudentAid.gov, which will assist in making it easier for students, parents, and borrowers to navigate the financial aid process. These new resources offer more than just information in an easy-to-read format; they also feature interactive tools, such as videos and infographics, to help answer the most frequently asked questions about financial aid.

StudentAid.gov is the first step to develop a single point of entry for students accessing federal student aid information, applying for federal aid, repaying student loans, and navigating the college decision-making process.

QUICKBOOKS SETUP ERROR & HOW TO FIX IT #2


This is my second in the Quickbooks Tips series:
QuickBooks is driven by lists – quite a few of them. You have to know your business and know what the lists mean so that you can efficiently and effectively create a database.  Here is another QuickBooks setup error that we see the most AND how to fix it.

Customers and Jobs

Customer and job organization not appropriate for reporting needs: Customer/Jobs don’t work for every QuickBooks user. In my experience, I’ve seen it used most often in construction, home improvement or real estate/property management companies where there are multiple & concurrent “jobs” worked for each customer that the business owner would like to track separately (typically for profitability reporting reasons). If this does not describe you and your business, then the extra level of “Jobs” is inappropriate for your reporting needs and is probably overkill.

Redundant or duplicate: Again, the same as with the Chart of Accounts, you don’t want a bloated list of Customers/Jobs. Periodically review the list for duplicates and merge the Customers.

Jobs not properly assigned to customers: If you use Jobs, you want to make sure that they are properly assigned to Customers. Periodically review your customer & job list to make sure that everything is as it should be.

Don’t be afraid to ask for some help!