Year-End Tax Planning Tidbits
by Parman R. Green
Ag Business Management Specialist
111 N. Mason, Carrollton MO 64633
1. Section 179 “capital expense write-off election”
has been increased to $102,000 for 2004.
2. The additional first-year depreciation has been increased
to 50% for qualifying new property acquired after May 5, 2003. This
deduction is claimed after the Section 179 deduction but before the
calculation of regular depreciation.
3. If more than 40% of your depreciable assets were acquired in the
last quarter of the year, you will be required to use mid-quarter
depreciation instead of mid-year depreciation.
4. Analyze sales of capital assets – beware of the annual net capital
loss limitation ($3,000 or $1,500 if married and file a separate return).
5. Avoid year-end (paper) overdrafts. If necessary, borrow the needed
funds for a few days. Note: charges made on your business credit card
are deductible the date charged – not the date paid.
6. Review the three year farm income averaging or five year net operating
loss carryback provisions, as appropriate.
7. Consider utilizing pension, individual retirement accounts (IRA),
or Roth IRA.
8. Be aware the IRS is vigorously and successfully reclassifying cash
rents paid to shareholders, partners, and spouses where they concurrently
participate in the business operations - as earned income subject
to self-employment tax.
9. The self-employment health insurance deduction has been increased
10. The maximum earnings subject to social security has been increased
11. You generally must make periodic deposits of employee taxes if
you are liable for $1,000 or more of Social Security, Medicare taxes,
and withheld income tax.
12. By January 31, you must furnish each employee with a Form W-2;
as well as 1099s to non-corporate cash rent landlords, contractors,
etc. who were paid $600 or more throughout the year.
13. Review all your ’03 and ’04 CCC grain loan and market loan gain
transactions to insure you are not over reporting taxable income from
14. Farmers only – if you do not pay your estimated income tax by
January 15, 2005, you must file your 2004 return and pay the tax due
by March 1, 2005 to avoid the underpayment of estimated tax penalty.
15. Complete any gifts by December 31 which you desire to be included
in transfers qualifying for the 2004 calendar year $11,000 annual
gift exclusion per donee. Reminder: to qualify for the annual gift
exclusion – the gifts must be present-interest gifts.
16. The unified credit applicable exclusion for gift and estate taxes
are $1,000,000 and $1,5000,000, respectively.
17. Conduct an “estate fire-drill” – you just “DIED” – don’t worry
about the exactness of the tax liability – but in general, what would
be the tax liability and settlement costs. How would your assets be
distributed; how will your liabilities be handled; who will manage
the business; do you foresee any intra-family problems generated by
your demise; etc., etc.? Did the estate fire-drill identify some
areas to be given greater attention?
2004 Year-End Tax Management For Farmers and Ranchers
may downloaded at:
The Ag Tax Tidbits Web Site is at: http://agebb.missouri.edu/agtax/index.htm