2023 Income Tax Returns and other filing requirements

 

We are already two weeks into 2024 and we hope it is off to a good start for you! As you look back on 2023 in preparation for filing your income tax returns, consider the major tax law changes that have occurred, which include:

1. The Inflation Reduction Act increased tax credits and lifetime limits for energy efficiency home improvements and residential energy property, as well as for new and used clean-energy vehicles.

2. Beginning in 2023, deductibility of federal income tax on your Iowa tax return has been eliminated, married taxpayers can no longer file separately on a combined return, and Iowa will no longer tax retirement income, which includes 401(k)s, pensions and IRAs, and certain farm rental income.  More information about changes to Iowa's tax law can be found here:

https://tax.iowa.gov/2023-changes-iowa-individual-income-tax

3. The age at which you must begin taking required minimum distributions from your retirement accounts has increased to 72.

4. Business meals are no longer 100% deductible; the old deduction rules now apply.

Please continue to be alert to tax scams. Do not respond to any phone calls or e-mails purporting to be from the IRS, Social Security, or the Iowa Dept. of Revenue – those agencies will make initial contact by mail. You are welcome to bring any such letter to our office for verification. Never include social security or bank account numbers in an unencrypted e-mail or in a phone call you did not initiate to a trusted number.

If you choose to have our office prepare and file your federal and state tax returns, you will need to sign and return our engagement agreement.  Our contact information is at the bottom of this post. All professionally prepared tax returns must be filed electronically (“e-file”). If you want to file your own tax return for free, go to this webpage to learn how to electronically file your federal tax return for free:

https://www.irs.gov/newsroom/irs-free-file-is-now-available-for-the-2023-filing-season

Go to this webpage to electronically file your Iowa tax return for free:

https://tax.iowa.gov/individual-income-tax-electronic-filing-options

If you need worksheets or forms, please let us know. The IRS requires mileage logs for vehicles with business use. This is absolutely necessary for vehicles that are also available for personal use.

If you have a trade or business, 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 in the course of said business. Be sure to collect Form W-9 from each of your contractors or you may be required to make backup withholding deductions from your payments. Payments to cooperatives, banks and corporate entities are excluded. Wages in excess of $150 in any quarter require the filing of Forms W-2 and W-3. If you would like us to prepare these forms, you will need to provide us with the information before January 27, 2024.

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. If you want to e-mail us information securely, send us an e-mail and we will open a Trustifi^® portal for encrypted transmissions.

If you are involved in a business entity, there are a number of other new things of which you should also be aware, which include:

1. In an effort to reduce money laundering and tax evasion, the U.S. Treasury is requiring most small business entities to register with the FinCEN (Financial Crimes Enforcement Network). The initial report, which is called “Beneficial Ownership Information” (BOI), must be filed by December 31, 2024, for already existing businesses. (The time frame is much shorter for new business entities.) However, you are advised not to wait until the last minute as there will be considerable strains on the system at the close of the year and the penalties for non-compliance are substantial (including prison). The entities required to register include almost all limited partnerships, limited liability companies (LLCs), and corporations, except for publicly traded entities. Even single-member LLCs that are treated as “disregarded entities” for income-tax purposes must register. Living trusts that are treated as disregarded entities because the grantor is still the trustee do not have to register, but other types of trusts do need to register. Nonprofit entities with a tax-exempt determination do not need to register. If you want our office to file your BOI report, we will need to keep an image of each owner's driver's license, passport, or other approved identification.

2. Beginning in 2022, to combat out-of-state members or beneficiaries of Iowa entities who were not paying Iowa income tax on their Iowa earnings, Iowa now requires pass-through entities, such as LLCs, partnerships, S-corporations and trusts, to file a consolidated Iowa return called IA-PTE-C. The entitiy must also pay tax on behalf of its out-of-state distributees, unless they sign a Nonresident Member Agreement (NMA) each tax year.

3. Beginning in 2023, for members or beneficiaries of Iowa entities who were not able to deduct all their itemized state and local tax payments because of the $10,000 cap included in the Trump tax cut; Iowa now allows pass-through entities, such as LLCs, partnerships S-corporations and trusts, to elect to pay tax for all of their members or beneficiaries on a consolidated Iowa return called IA-PTE-T.

4. In an effort to close the “tax gap” (the gap between income tax owed and income tax reported [$688 billion in 2021]), IRS is stepping up enforcement of 1099 reporting rules. Of particular note is the requirement that you must have a signed, completed form W-9 from each person or entity to whom you are required to send a Form 1099 report. If you do not, you are required to withhold federal income tax from any payment you make to that business and deposit it with the U.S. Treasury.

Privacy Policy

Your privacy is important to us. Please read the following privacy policy.

We collect nonpublic personal information about you from various sources, including:

* Interviews regarding your tax situation

* Applications, worksheets, or other documents that supply such information as your name, address, date of birth, phone number, Social Security Number, income, dependents' information, and other tax-related data

* Tax-related documents you provide that are required for processing tax returns, such as Forms W-2, 1099B, 1099R, 1099INT, 1099DIV, 1099MISC, 1099NEC, 1099S, 1098, 1098E, 1098T, 1099SSA, 1099RBR, 5498,...

We do not disclose any nonpublic personal information about our clients or former clients to anyone, except as requested by our clients or as required by law.

We restrict access to personal information concerning you, except to our employees who need such information in order to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your personal information.

We charge a service fee for accepting payment of our tax preparation fees by credit card. If you choose to pay with a credit card, you may receive an email from the service Square, which processes the payment.

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.

Varley Law Office, PLC

Warren A. Varley • Attorneys-at-Law• Karen K. Varley

201 NE Second Street, P. O. Box 235, Stuart, Iowa 50250-0235

Phone: (515) 523-2456 [FAX 866-297-7985] E-mail: varleylaw@iabar.org

Iowa Farm Leases for Next Year

 

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2024 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, 2024, 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, 2023. 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 CSR2¹ of the soil in question is the most accurate and fair way to arrive at a comparable rent.² Below is a table of farmland values and cash rents in counties for which we prepare farmland 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 farmland looks like. The predicted annual rental is based on a 3% return on investment. With interest rates higher than that and most commodity prices declining, expect farmland values to level out and perhaps even decline, though demand remains strong. According to USDA, the average cash rent in Iowa was $269/acre in 2023,³ and you can see from the table above that crop land rents have mostly settled into the $3.50-$3.75/CSR2 range. One of the puzzling disconnects in the ISU survey is that good quality pasture rents for between $80 & $120/acre but comparable hay grounds typically brings twice that rate, which is a bigger difference than nutrient removal explains.⁴ Hunting rights now often garner more income than grazing corn stalks.

Please contact our office if we can be of assistance. Good luck with your negotiations!

Sincerely,

VARLEY LAW OFFICE, PLC                                                                            ©2023

1 https://www.extension.iastate.edu/agdm/wholefarm/pdf/c2-09.pdf

2 https://www.extension.iastate.edu/agdm/wholefarm/pdf/c2-10.pdf

3Updated “corn suitability rating” assessment You can calculate a CSR2 for your farm http://websoilsurvey.nrcs.usda.gov/app/WebSoilSurvey.aspx or get it from your assessor information http://www.iowaassessors.com/

4 See Computing a Cropland Cash Rental Rate: https://www.extension.iastate.edu/agdm/wholefarm/pdf/c2-20.pdf

Varley Law Office Celebrates 30 Years

 In 1992, Warren Varley opened a solo law practice in Stuart and has been providing legal services to the community ever since. His initial office was a room rented from Claudia Shepherd in what is now the LC Clinic building next to Lawbaugh Park. Claudia was more than a landlord and office-mate, she was a valuable mentor and friend. His first employee was Sheryl Christensen and they worked at an old oak double desk acquired from the Dallas County Courthouse. In 1996, Warren moved the law firm into a building across from the post office that he and his wife, Karen Varley, had purchased from Eugene Jirak. Also in 1996, Joyce (Mrs. Walt) Hick joined the firm as legal secretary, probate clerk, tax preparer, and office manager. Joyce had worked for the W. Dean Moore law office in Stuart since the early 1960's up until the sale of his practice in 1996. In addition, Joyce had obtained her real estate broker's license and managed a thriving real estate business known as Stuart Real Estate. Joyce's contribution to the success of Varley Law Office cannot be overstated! She was hard-working and dedicated to providing the best possible service to each client. Other valued employees of the firm, past and present, include Mary Skellenger Moffitt, Margaret Tiernan, Alberta Jirak, Carmen Hawley, Lesley Kerns-Wilson, Riley Schoen, Karli Rumley, Truman Wiles, Christine Baber, Jansen Van Daalwyk, Nicolas Aguero, Trevor Heimbaugh, Juanita Gilman, and Tyler McKibbin.

On Epiphany (Jan. 6) 2004, tragedy struck Varley Law Office when a fire destroyed the three adjoining buildings that included the firm. For a year and a half, the law office was located in the oldest downtown building at 100 NE Second ST, while the West Central Valley high school tech class built a new office at its present location, 201 NE Second Street.

In 2016, the firm expanded exponentially as Karen Varley joined the firm as a partner, and Varley Law Office PLC was organized. Karen had been in the legal profession for a considerable part of her life, starting as a legal secretary while in high school in Waukon, Iowa, and working for two years as a court reporter before obtaining degrees in agronomy and plant breeding from Iowa State and Cornell Universities. Eighteen years in the legal department at DuPont/Pioneer Hi-Bred International culminated in her getting a law degree from Drake University in May 2015.

Throughout its thirty years, Varley Law Office has provided a variety of legal services to the community, including business organization, estate planning, real estate transactions, tax planning and tax return preparation, and probate administration. Projects of particular note that the firm was involved in include the restoration of the Historic Saints Center and the Rock Island Railroad Depot; the organization and construction of 13 locally-owned and operated wind-energy turbines across Adair, Cass, and Taylor Counties; and a variety of development projects in conjunction with Stuart Enterprise for Economic Development, Inc.

Prior to opening his firm in Stuart, Warren worked at David L. Jungmann, PC, in Greenfield, IA, and Davis, Hockenberg, Wine, Brown, Koehn & Shors in Des Moines. In addition, he clerked for 7 rural district court judges in central Iowa for one year and for a New York appellate division justice in Cortland, New York for two years. Warren obtained his bachelors degree in agronomy from Iowa State University and his law degree from Cornell University in Ithaca, New York.

Karen and Warren Varley thank everyone who helped with or attended their open house November 10. At the celebration, Karen presented Warren with a plaque denoting that he attained "Very High" ratings in both legal ability and ethical standards from the Martindale-Hubbell® Law Directory. Martindale-Hubbell is a legal directory publisher founded in 1868 that rates attorneys based upon peer review. Warren's rating puts him in the top 10% of attorneys nationwide according to the American Registry.

Ag Lease Termination deadline Sept 1

 Now is the time dictated by Iowa law to begin negotiating crop land leases for 2023 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, 2023, 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, 2022. 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 CSR2¹ of the soil in question is the most accurate and fair way to arrive at a comparable rent.² Below is a table of farmland values and cash rents in counties for which we prepare farmland 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 farmland looks like. The predicted annual rental is based on a 3% ROI. Farmland appraiser Jim Rothermich notes that farmland values have increased 35.3% over the past six months,3 while Extension economist Alejandro Plastina tells us cash rental rates rose at a comparatively modest rate of 10.3% over the last year (even so, the third increase in a row and largest since 2013).4 Both are being driven higher by food shortages and correspondingly high commodity prices, but rental rates are being tempered by equally high input prices. Nevertheless, an auction in Calhoun County in March pegged rent at a whopping $438.50/acre on a quarter section of 84.8 CSR2 land. Look for rising interest rates and a slowing economy to temper those increases.

Please contact our office if we can be of assistance. Good luck with your negotiations!

Sincerely,

VARLEY LAW OFFICE, PLC ©2022

1Updated “corn suitability rating” assessment You can calculate a CSR2 for your farm [http://websoilsurvey.nrcs.usda.gov/app/WebSoilSurvey.aspx]

or get it from your assessor information [http://www.iowaassessors.com/].

2 See Computing a Cropland Cash Rental Rate: https://www.extension.iastate.edu/agdm/wholefarm/pdf/c2-20.pdf

3  Jim Rothermich MAI ARA ALC theLandTalker@iowaappraisal.com   https://www.iowaappraisal.com/media/cms/May_2022_Iowa_Land_Auction_Results_D90F044F42244.pdf

4 Iowa State University Agricultural Economist Alejandro Plastina   https://www.extension.iastate.edu/agdm/articles/plastina/PlaMay22.html

2021 Income Tax Returns

Welcome to 2022! 2021 was an unusually prosperous year as the economy roared back in spite of the ongoing pandemic: stock prices & wages rose, farmers enjoyed high yields & commodity prices, and the American Rescue Plan pumped economic stimulus into the economy. With that in mind, there are many things to be aware of as you gather your year-end tax documents.

1. Married couples can deduct up to $600 in charitable contributions from your taxable income, even if you take the standard deduction (up from $300 per tax return last year). You still need a written receipt for any donation of $250 or more. Donations to charity from IRAs, donor-advised funds, and gifts of grain remain popular ways to get a charitable donation deduction.

2. If you received advanced Child Tax Credits (CTC), you will receive a letter Form 6419 showing the amount of advanced payments you received. Even though it looks like a letter, it is a form that your tax preparer will need along with your W-2s, 1099s, and other tax reporting documents. This is necessary because the $1,000 to $1,600 CTC per child phases out above $150,000 AGI for married filing joint and above $75,000 AGI for single taxpayers. The base $2,000 CTC per child still phases out above $400,000 AGI for married filing joint and above $200,000 AGI for single taxpayers.

3. We will also need to report the third ($1,400) Economic Impact Payments that you should have received under the CARES act. Like the CTC, these funds are not taxable, but there is a phaseout, so you will have to pay some or all of it back if your income is above your threshold. In addition, if you should have received it, but didn't, it is available as a refundable credit.

4. All taxpayers must answer the question about whether they did any virtual currency (BitCoin, Ethereum, etc.) transactions in 2021.

5. IRS is continuing to crack down on shareholders in S-corporations and partnerships who take distributions in excess of basis without reporting it as taxable income. There is a new Form 7203 for reporting shareholder basis.

Please continue to be alert to tax scams. Do not respond to any phone calls or e-mails purporting to be from the IRS, Social Security, or the Iowa Dept. of Revenue – those agencies will make initial contact by mail. You are welcome to bring any such letter to our office for verification. Never include social security or bank account numbers in an unencrypted e-mail or in a phone call you did not initiate.

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”). If you want to file your own tax return for free, here is the  link: https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

If you need worksheets or forms, please let us know. IRS requires mileage logs for vehicles with business use.  Here are the standard mileage rates for 2021:

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 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. If you would like us to prepare these forms, you will need to provide us with the information before January 27, 2022.

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. If you want to e-mail us information securely, send us an e-mail and we will open a Trustifi^® portal for encrypted transmissions.

Varley Law Office, PLC

Warren A. Varley • Attorneys-at-Law• Karen K. Varley

201 NE Second Street, P. O. Box 235, Stuart, Iowa 50250-0235

Phone: (515) 523-2456 [FAX 866-297-7985] E-mail: varleylaw@iabar.org

Iowa Farm Leases for 2022

 

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2022 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, 2022, 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, 2021. 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: https://www.extension.iastate.edu/agdm/wholefarm/pdf/c2-10.pdf]. You can calculate a CSR2 for your farm [http://websoilsurvey.nrcs.usda.gov/app/WebSoilSurvey.aspx] or get it from your assessor information [http://www.iowaassessors.com/]. Below is a table of farmland values and cash rents in counties for which we prepare farmland leases:

* ISU/CARD survey, Realtors Land Inst., & Jim Rothermich Auction Results

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 farmland looks like. The predicted annual rental is based on a 3% ROI. Land prices continued their downward slide in 2020 but rebounded sharply in 2021, driven by strong commodity prices and trade resumption, and supported by very low interest rates, anxiety about inflation and a rebounding economy. Farmland appraiser Jim Rothermich (iowaappraisal.com) notes strong non-farmer, investor demand for Iowa farmland and sees an average price for cropland topping $10,000/a in the second half of the year, at an average of $145/CSR2pt. This is bound to put upward pressure on cash rental rates, so we used top third survey averages to compensate for the time lag in the survey results. As this pushes cash rent toward and past $300/acre, there will be renewed interest in flexible rent and custom farming arrangements. A good discussion of the risks and rewards of alternative agreements can be found here: https://www.extension.iastate.edu/agdm/wholefarm/html/c2-01.html 

Based on the leases we have seen so far this year, the following table shows where cash rents are shaking out compared to the quality of the soil based on CSR2 ratings.  

We will try to update this as we get more information.  

Please contact our office if we can be of assistance. Good luck with your negotiations!

Sincerely,

VARLEYLAW OFFICE, PLC

                                                                                                                                                                  ©2021

Year-End Tax Planning for 2020

  As we approach the end of a year that most of us are anxious to put behind us, We wish you and your loved ones a happy holiday season and a healthy & prosperous new year. We are writing earlier than usual because the Coronavirus Aid, Relief & Economic Security [CARES] Act, contained provisions that might affect your year-end tax planning.

1. You can deduct up to $300 in charitable contributions from your taxable income, even if you take the standard deduction. It is $300 per tax return, so married, filing jointly taxpayers are limited to a single $300 deduction. You still need a written receipt for any donation of $250 or more.

2. There is no required minimum distribution from traditional IRAs this year. You may still want to take out some funds to reduce tax on the back end. However, taxation of inherited IRAs is much more favorable under the new rules. Remember that you can contribute funds directly from your traditional IRA directly to a charity as a way to get funds out of your IRA without paying tax on it or having it increase the amount of social security subject to tax. Donating grain to a charity is another way to reduce income tax liability.

3. The Economic Impact Payments ($1200/adult taxpayer $500/dependent minor) are not subject to income tax & if you did not receive yours, you can apply for it on your 2020 tax return. If you received a $500 dependent minor payment to which you were not entitled, you may keep it. If you received a $1200 payment for a spouse who died prior to 2020, you must return it.

4. All taxpayers must answer the question about whether they did any virtual currency (BitCoin, Ethereum, etc.) transactions in 2020.

5. There is now a tax credit for sick leave and family leave taken by certain self-employed taxpayers.

Please continue to be alert to tax scams. Do not respond to any phone calls or e-mails purporting to be from the IRS, Social Security, or the Iowa Dept. of Revenue – those agencies will make initial contact by mail. You are welcome to bring any such letter to our office for verification. Never include social security or bank account numbers in an unencrypted e-mail or in a phone call you did not initiate.

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”). If you want to file your own tax return for free, here is the link: https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

IRS requires mileage logs for vehicles with business use.  Here is the latest information for mileage deduction rates.

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 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 27, 2021.

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. If you would like worksheets or want to e-mail us information securely, send us an e-mail and we will open a Trustifi^® portal for encrypted transmissions.

Privacy Policy

Your privacy is important to us. Please read the following privacy policy.

We collect nonpublic personal information about you from various sources, including:

* Interviews regarding your tax situation

* Applications, worksheets, or other documents that supply such information as your name, address, date of birth, phone number, Social Security Number, income, dependents' information, and other tax-related data

* Tax-related documents you provide that are required for processing tax returns, such as Forms W-2, 1099B, 1099R, 1099INT, 1099DIV, 1099MISC, 1099S, 1098, 1098E, 1098T, 1099SSA, 1099RBR, etc.

We do not disclose any nonpublic personal information about our clients or former clients to anyone, except as requested by our clients or as required by law.

We restrict access to personal information concerning you, except to our employees who need such information in order to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your personal information.

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.