Tax Law Changes - 2017 Tax Returns

Once again it is time to gather your income and deduction records in preparation for filing your 2017 income tax returns.

In light of the  doubling of the federal standard deductions for 2018, it would in most cases be wise to maximize your 2017 deductions if you itemize:*

1. If you pay estimated tax, you probably already pay your 4^th installment in December, but you may want to consider increasing your state estimate.

2. Pay the March installment of property taxes on your residence in December.

3. Consider increasing your December gifts to charity if you will not be getting any tax benefit from making gifts to charity under the proposed tax law changes. (Note that next year contemporaneous proof will be required for all charitable deductions, not just donations over $250.)

If you need more specific year-end tax planning advice, you should contact our office to make an appointment. If you choose to have our office prepare and file your federal and state tax returns, you will need to sign and return the engagement agreement on the reverse side of this letter. All professionally prepared tax returns must be filed electronically (“e-file”). Refunds will take longer to process due to ongoing efforts to reduce fraudulent refunds obtained by identity theft. Your best protection against such stolen refunds is to file as soon as you receive your tax documents (W-2s, 1099s, K-1s, etc.).

If you made significant purchases (whether personal or for business) with cryptocurrencies (such as Bitcoin or Ethereum), be aware that you may have a taxable capital gain to report due to the dramatic rise in their value. Do not assume that your transactions cannot be audited by the IRS. 

On the related topic of cybersecurity:  Please do not send any documents by e-mail that contain social security numbers or bank account numbers, unless they are password protected.

IRS requires mileage logs for vehicles with business use; standard mileage rates for 2017 are:

                                                     Federal            Iowa

Business:                  53.5¢/mi.      53.5¢/mi.

Medical & moving:  17¢/mi.         17¢/mi.

Charitable:                14¢/mi.         39¢/mi.

You are required to send a Form 1099 to any individual, partnership or LLC that you paid $600.00 or more for services, rent or interest paid in the course of your trade or business. Payments to cooperatives, banks and other corporate entities are excluded.   Wages in excess of $150 in any quarter require the filing of Forms W-2 and W-3 (for household employees you may file Schedule H with your tax return instead). If you would like us to prepare these forms, you will need to provide us with the information before January 24, 2018.  

 If you have questions on any of the above or other tax matters feel free to call, e-mail, or stop in. When you have your records ready you may let us know and we will set up an appointment that is convenient for you. Evening or Saturday appointments can be arranged.

Best Wishes for the New Year!

                                                                                                                                     

*Pursuant to U.S. Treasury Regulations, you are advised that any federal tax advice included in this communication is not intended or written to be used, and cannot be used, to avoid any U.S. federal tax penalties or to promote, market, or recommend to another party any transaction or matter. 

Farm Leases for 2018

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2018 or at least notify your tenant/landlord, as the case may be, if you wish to change any of the terms in your current lease. (Remember that mutual consent is required if you want to make changes in the middle of a multi-year lease.)

If you wish to terminate a cropland or pasture lease ending March 1, 2018, and have not already done so, you must serve notice in the manner set out in Iowa Code §562.7 on or before September 1, 2017. This statute does not apply to custom farming arrangements, but by tradition, many farm operators have come to expect notice by September 1.

Basing cropland rent on the current CSR2 (updated “corn suitability rating” assessment) of the soil in question is the most accurate and fair way to arrive at a comparable rent [See Computing a Cropland Cash Rental Rate: iastate.edu/Publications/FM1801 Computing a Farm Rental Rate]. In addition, you can calculate a CSR2 for your farm [http://websoilsurvey.nrcs.usda.gov/app/WebSoilSurvey.aspx]. Below is a table of farmland values and cash rents from last year's ISU surveys in counties for which I prepare farm land leases:

The table above is based upon averages from sometimes limited survey results, but it does give a general idea of what the market for Iowa farm land looks like. The predicted annual rental is based on a 3.25% ROI. The leases I have prepared so far this year now fall in the $2.00 to $2.85/CSR point range, with the higher quality land falling at the higher end of that range. Farm lease rates continue to fall in sympathy with soft commodity prices. Land prices also continue to decline, but at a much slower pace. I would expect that to change if interest rates continue to rise.

Please contact our office if you have questions. Good luck with your negotiations!

2016 Tax Returns

 Once again it is time to gather your income and deduction records in preparation for filing your 2016 income tax returns.

If your gross household income was less than $62,000, you qualify for free e-filing of your tax return at:

http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free

If you choose to have our office prepare and file your federal and state tax returns, you will need to sign and return the engagement agreement on the reverse side of this letter. All professionally prepared tax returns must be filed electronically (“e-file”). IRS will begin accepting e-files on January 23 this year. You should be able to collect your tax records sooner this year because IRS has shortened the deadline for Form 1099 to January 31, and the deadline for Form K-1 to March 15.

As in past years, you must have a contemporaneous written receipt for donations totaling over $250 to a particular charity. I cannot prepare your tax return if you hold any assets outside of the United States. Identity theft continues to be a problem. Please do not send any documents by e-mail that contain social security numbers or bank account numbers, unless they are password protected.

IRS requires mileage logs for vehicles with business use; standard mileage rates for 2016 are:

                                               Federal         Iowa        

Business:               54¢/mi.        54¢/mi.

Medical & moving:  19¢/mi.      19¢/mi.

Charitable               14¢/mi.        39¢/mi.

You are required to send a Form 1099 to any individual, partnership or LLC that you paid $600.00 or more for services, rent or interest paid in the course of your trade or business. Payments to cooperatives, banks and other corporate entities are excluded. Wages in excess of $150 in any quarter require the filing of Forms W-2 and W-3 (for household employees you may file Schedule H with your tax return instead). If you would like us to prepare these forms, you will need to provide us with the information before January 25, 2016.

If you have questions on any of the above or other tax matters feel free to call, e-mail, or stop in. When you have your records ready you may let us know and we will set up an appointment that is convenient for you. Evening or Saturday appointments can be arranged.

Best Wishes for the New Year!