Issue 31
Marketing Guide 2000
 

Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat, Inc. and the Minnesota Barley Growers Association.

Copyright
Prairie Grains Marketing Guide 2000

Top tax tips for Y2K

By Betty Thom

The financial goals of producers are very similar to the rest of Americans—make as much money and pay as little taxes as possible.

It's not too early to start thinking about the tax implications for Y2K, nor is it too late to make changes. The following tax tips from Bob Jennings, CPA and owner of Jennings Advisory Group LLC, and Ronn Fuchs, CPA at Schauer and Associates, P.C., may help keep more of those hard-earned dollars in your bank account—not Uncle Sam's.

1. Restructure medical insurance using Medical Savings Accounts (MSA) which provide tremendous tax benefits along with affordable insurance premiums. MSA is a combination of a savings account to pay routine medical costs and an insurance plan to cover major medical claims.
2. Hire minor children, pay them a reasonable wage, and reduce social security taxes for the parents.
3. Take advantage of Section 105 for medical reimbursement plans. The plans allow for complete deduction of uninsured medical costs. (See related story on AgriPlan below).
4. Deduct meals and housing costs in some employee situations.
5. Give gifts to charities and family members (14 years of age and older) in the form of commodities (grain, animals, etc.) Bear in mind that gifting farm commodities may affect some farm program benefits, such as LDPs.
6. Pay employees with commodities and save social security tax for both the producer and the employee.
7. Prepay feed and chemical costs if needed for additional deductions.
8. Avoid quarterly estimated tax payments in most cases.
9. Sell the farm on contract and pay the tax as payments are received.
10. Store grain, sell it, and report the income when sold, rather than when harvested. This uses cash basis accounting instead of the accrual method.
11.  Use spousal wages and benefits for additional deductions.
12. Invest in simple IRA plans.
13. Plan for income averaging.
14.  Deduct 75% of vehicle use without keeping a logbook – or up to 100% with a logbook.
15. Write off single purpose agricultural structures (i.e. grain bins) in seven years. Duel purpose structures use a 20-year plan.
16. Take time to plan!

Many of these tips need a plan in place before Dec. 31, 2000. After harvest, make an appointment with your tax advisor or accountant to see if and how you qualify for these and other tax benefits.