Your EA CPE Needed by Individuals With Farm and Ranch Sidelines

In many locations of the US, suburban living has come to encompass owning some extra acreage for a farm or ranch sideline to subsidize income. Individuals engaged in this activity need to find out about the expertise you offer from having passed the?enrolled agent examination. The tax reporting for an agricultural activity is cumbersome for someone with another primary source of income. They need your help to develop the necessary records for accurate tax treatment of their sideline.

Regardless of the part-time nature of a farm or ranch activity, any income from selling livestock or crops is taxable.

The greatest difficulty in addressing livestock sales is often encountered when separating the sale of raised livestock from sales of breeding stock.

Animals purchased for breeding are depreciable assets. When sold, there is a capital gain or loss. That is a lot different tax treatment than selling raised livestock. You even learn from your?EA CPE?that reporting of capital gain on livestock is affected by having to sell due to weather conditions.

Sold livestock has a basis to subtract from proceeds when determining gain or loss. By using the training from your?enrolled agent course, you can prepare tax returns with depreciation calculations as well as capital gain or loss determinations. This makes you a valuable part of someone?s ranching business because they need to rely upon you over many years for their tax record keeping. You can build a stable group of clients from taxpayers who are part-time ranchers.

Other types of ordinary income from agricultural activity include payments from the US Department of Agriculture and proceeds from crop insurance. Actual crop sales are usually made to a farm cooperative. All of these entities will send a Form 1099 to the farmer.

Like any business activity, taxable agricultural income is determined by subtracting ordinary and necessary business expenses from revenue. Profit or loss is calculated on Schedule F, which is covered in your?enrolled agent study guide?when preparing to become an EA. Every type of income and each category of expense are separately recorded on Schedule F.

A loss on Schedule F is deductible against other sources of income on a tax return. Farming and ranching is considered self-employment and therefore incurs the self-employment tax calculated on Schedule SE.

One of the important reasons taxpayers with agricultural activities should choose?enrolled agents?for tax services is the special rules available to filers of Schedule F.

For example, farmers and ranchers can use income average over three year periods. This uses income information from past years to lower current year income that?s unusually high. In addition, Schedule F income can normally avoid a requirement for estimated tax payments throughout the year. Knowing these rules is how an enrolled agent tax practice saves time and trouble for anyone with agricultural activity.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

Source: http://www.a1article.net/pets/your-ea-cpe-needed-by-individuals-with-farm-and-ranch-sidelines-10709.html

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