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Tax Tips for Farmers and Ranchers

Michelle-Minnerath-headshotThis year has been tough on many farmers and ranchers in South Dakota due to the lack of moisture and the hail storms that have went through the region. Many ranchers have decided to sell down their herd due to lack of pasture, water, and hay.  The IRS assists these taxpayers by providing a few deferral options.  The first option requires the taxpayer live in a persistent drought area reported by the U.S. Drought Monitor and they had to sell breeding livestock due to the weather conditions.  Contact Ketel Thorstenson to find out which counties qualify for the deferral this year. This election allows the taxpayer non-recognition of gain from the sale of this breeding livestock where replacement property is purchased within applicable time guidelines.  The replacement period ends the first year after the first drought-free year for the region.  The second option allows ranchers who had to sell more animals than their usual business practice due to the weather related conditions, the ability to defer or postpone reporting the income from the additional animals for one year.  An example: If in prior years the rancher normally only sells steers and keeps the heifers for replacement but this year due to the drought the rancher sold all the steers and the heifers.  The rancher would be able to defer in this situation the income from the sale of the heifers for one year.

The new overtime rules going into effect December 1, 2016 has been all over the news. We have had many calls from our agriculture communities asking if they have to follow the new rules.  The answer to that is very often no they do not. Any employer in agriculture who did not utilize more than 500 “man days” of agricultural labor in any calendar quarter of the preceding calendar year is exempt from the minimum wage and overtime pay provisions of the Fair Labor Standards Act for the current calendar year. A “man day” is defined as any day during which an employee performs agricultural work for at least one hour. However, farmers and ranchers that have employees do need to keep track if they are required to file state and federal unemployment reports. They are required to file if they paid wages of $20,000 or more to employees during any calendar quarter in 2016 or if they employed 10 or more employees during any 20 or more calendar weeks in 2016. Be careful on planning year-end bonuses because this is included in wages and could cause wages to go over this limit.

Please contact your KT representative with any questions you might have concerning the deferral options or the payroll issues that were discussed.

Michelle Minnerath

Michelle Minnerath

Michelle Minnerath joined the firm in 2005. She specializes in the Farm & Ranch industry, estates and trusts as well as small business and individual tax planning and return preparation.
Michelle Minnerath

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