2020 farm income brings tax challenges

A University of Wisconsin Extension economic development specialist says 2020 will be an unusual year for doing farm taxes.

Katie Wantach says farmers may have received some payments from Ag Risk Coverage and Price Loss Coverage program payments this fall, the Coronavirus Food Assistance Programs, Market Facilitation Program payments, and state assistance efforts including the Wisconsin Farm Support Program. “All of those will be government program payments reported on their Schedule F. If they file Schedule F, lines 4-A and 4-B and those will be taxable income.”

She says crop insurance payments may be eligible for deferral, but not the government program payments. “These government program payments were as a result of income loss, some market loss, or something like that which means you have to take it in the year that it was received and will need to be reported on.”

And, because many farmers had much higher gross incomes thanks to the various aid programs, there are deductions to consider to lower tax liability. “Prepaying for those farm inputs of seed, gas, diesel. You know, just keep in mind that you really should not exceed 50% of those farm expenses in most situations and you really should have some type of documentation.”

Wantoch says the documentation should show stated quantities and prices to better show where the money went.  She also says farmers should also consider putting some extra cash into retirement accounts and perhaps health savings accounts, depending on each farm’s circumstances. Wantach says farmers should plan to spend time with their tax consultants to make sure they can use every legal deduction possible

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