Does the Estate Tax Hurt Farmers and Family Businesses?

The battle cry against the estate tax usually rages around “farmers and family businesses.” Chuck Grassley (Iowa) has been insisting that the tax deal "makes sure the government can’t take more than half the estates of farmers and small business owners who have scrimped, sacrificed and saved their entire lives to build up a family business.” As it turns out, the estate tax only affects a small fraction of farms and family businesses.

According to a recent IRS report, these businesses account for a small fraction of estates worth $3.5 million or more:

The study shows that in 2007, investment real estate — which includes farms, undeveloped land, real-estate investment funds, real estate partnerships and other investments — accounted for only 15% of total portfolios for estates over $3.5 million. Farms are only a fraction of the 15%.

Limited partnerships and business assets account for about 5.5% of their total assets.

So what is in the big estates? Mostly publicly traded stock. The study found that publicly traded stock accounted for more than a third of the assets held by estates of $3.5 million or more.

Of course, some small businesses and farmers would get hurt from a $3.5 million rate. And there may be other good arguments for ditching the estate tax. But it’s misleading to say farmers and small businesses would bear the brunt of the tax. Unless of course, Paris Hilton’s brief stint on “Simple Life” makes her a farmer.

The real victim of the Democratic proposal would be wealthy shareholders and the stock market. Yet strangely, we don’t see politicians championing the rights of the stock market and big shareholders in their death-tax crusade.

Continue reading at WSJ.com...

10 Tax Tips for Farmers

Yesterday the RDTC Tax Help Blog posted an interesting article with advice for taxpayers working in the farming industry. You can find a snippet of the article below, or click here for the full text.

1. IRS Publication 225

Before you even start thinking about the tax incentives for farming, you should download and read IRS Publication 225 – Farmer's Tax Guide. It was written by both IRS agents and farm extension specialists, and explains complicated tax rules that apply to farmers.

2. Business vs. Hobby Farming

There are significant financial differences between classifying your farm as a business versus a hobby. If your farm is not your sole or primary business then the related deductions you can claim are greatly limited. However, if you establish your farm as a business then you will become eligible for dozens of tax incentives. Publication 225 explains the criteria for classifying your farm as a business, such as demonstrating the intent to make a profit and actually making a profit in three years of a five-year period.

3. Keeping it in the Family

Farmers often employ their own children because of the advantageous tax benefits for both the parents and children. If your child is between the ages of 7 and 18, and your farm is not incorporated, then you can employ them without having to pay social security taxes. The wages are also still deductible on Schedule F.

Continue reading at RDTC.com...

Top 10 Halloween Season Tax Tips

Halloween is one of my favorite holidays. I always look forward to my law firm’s annual celebration. However, there is more to Halloween than costumes and trick-or-treating. The end of the year is only a few weeks away, and Halloween season is a good time to start thinking about taxes. To help my readers save a little money this year, I have put together ten spooky Halloween tax tips.

1. Haunted Home Renovations

Before you have guests over for a Halloween party, you might want to consider making some green renovations to save on energy. By installing a programmable thermostat, or upgrading to dual pane windows, you can keep your guests comfortable and also qualify for an Energy Star tax incentive. For more information, check out EnergyStar.gov.

2. Spooky Soiree's

Most teachers try to throw Halloween parties for their students, but due to budget cuts many educators are forced to finance these events out of their own pockets. Fortunately, if you are a qualifying teacher then you can use these expenses as part of your educator expense deduction.

3. Supernatural Savings

The average consumer spends about $66 each year on Halloween decorations, costumes and candy. Unfortunately, if you visit your local party supply store then you may end up paying more then you need to for your Halloween supplies. Instead, check out deals online to make your money stretch.

4. Eerie Extensions

If you had to file a tax return extension in 2009, then October 15th was the deadline to get your return in. The longer you wait to file your return, the more you will have to pay in IRS late penalties. If you have not yet competed your return, I highly recommend calling a tax professional right away.

5. Chilling Charity

As the weather cools down in October, charities begin asking for cool weather donations. When you have some free time, go through your winter wardrobe with your family to see if you have any extra sweaters, or blankets to donate. Keep the receipt for your contributions, and you can deduct the donation on your next tax return. However, you will need to itemize your return to qualify for this specific tax incentive. For more information, you can read this article explaining the charitable contribution deduction on RDTC.com.

6. Tip or Treat

If you receive tips at your job, then the IRS requires that you keep track of your total tips and report them to your employer. According to Topic 761, if you get $20 or more in tips during a calendar month then you are required to report them to your employer by the 10th of the following month.

7. Witchy Work Party

Throwing a Halloween party at the office is not only great for moral, but also comes with a nice little tax deduction. Food and supplies purchased for your employees can usually be written off if the party is held on the premises. If you plan a dinner or get together at a nearby restaurant then you can deduct half of the expense.

8. Dastardly Deadlines

Since every taxpayer is not required to make estimated quarterly tax payments, it can be easy to forget about the deadlines. Unfortunately, September 15th was a payment due date, and if you did not remember to send in your check then you should try to do so as soon as possible to avoid excessive penalties.

9. Franken-Farming

October is a busy month for many farmers. Luckily, there are several ways for taxpayers who own farms to save on their taxes. Hiring family members or depreciating capital farm assets are both tax savvy moves to make. For more information, you can read IRS Publication 225, Farmer’s Tax Guide.

10. Creepy Calculating

Like it or not, Halloween means that there are only two months left in the year. It is a good idea to think about calculating your tax liability so that you get a head start on end of the year tax planning. If you are looking for ways to prevent owing the IRS a large payment, then check out this article on RDTC.com with advice on how to lower your tax liability.