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.

Privacy Policy - Varley Law Office PLC

 

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 legal 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.

2021 Iowa Farm Leases

Varley Law Office, PLC

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2020 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, 2020, 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, 2020. 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]. In addition, you can calculate a CSR2 for your farm. 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 3.25% ROI.  Land prices have risen this year, driven by low interest rates and favorable commodity programs. To a lesser extent, rental rates followed land prices as they rose. Currently, there is a strong demand for land, but a limited supply. In addition, there has been an increase in the number of landowners engaging in custom farming. Ag commodity programs such as subsidized crop insurance and the market facilitation program have reduced risk, encouraging land owners to engage farm management companies such as Hertz Farm Management and Peoples Company, rather than opt for cash rentals, so they can take advantage of tax incentives available to operators. Things to keep an eye on include whether interest rates will remain low, the global response to the pandemic, and our trade policy with China.

Finally, with its growing popularity, it is important to know a little information regarding Hemp production in the State of Iowa. In May 2019, the Iowa Hemp Act was signed and this year the Iowa Department of Agriculture & Land Stewardship began issuing licenses to grow hemp. However, it is important that landowners know who they are leasing their land to if they plan on growing hemp on their land. If the hemp licensee grows hemp that fails the THC test, the entire crop will have to be destroyed. If the licensee fails to destroy the crop, the State of Iowa will come onto the land to do it. Moreover, if the operator cannot be found, the landowner will be assessed the costs of destroying the crop grown on their land.

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

Sincerely,                                  

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

(515) 523-2456

FAX 866-297-7985

varleylaw@iabar.org

©2020

Effective March 30, 2020,

the lobby at Varley Law Office, PLC, will be closed

to help reduce the spread of the coronavirus Covid-19.

If you require legal services, please contact us

by phone at 515-523-2456

or by e-mail at varleylaw@iabar.org

We apologize for any inconvenience, but believe this is a necessary step to protect public health.

Adapted from IRS Tax Tip 2019-79:

Members of the armed forces are entitled to certain tax benefits

Members of the military and their families often qualify for special tax benefits. Here are some examples:

• Combat pay exclusion. If someone serves in a combat zone, part or all of their combat pay is tax-free. 
• Deadline extensions. Some members of the military – such as those who serve overseas – can postpone most tax deadlines. 
• Joint return signatures. Both spouses must normally sign a joint income tax return. However, if military service prevents that from happening, one spouse may be able to sign for the other or get a power of attorney.
• Reserve and National Guard travel. Members of a reserve component of the Armed Forces may be able to deduct their unreimbursed travel expenses on their return. In order to do so, they must travel more than 100 miles away from home in connection with their reserve duty.
• ROTC allowances. Some amounts paid to ROTC students in advanced training are not taxable. This includes things like allowances for education and subsistence. On the other hand, active duty ROTC pay is taxable. This includes things like pay for summer advanced camp.

For more information, see Publication 3, Armed Forces’ Tax Guide.