Agricultural producers normally would have until March 1, 2013, to file their tax returns without penalty if they have not made estimates.

“Because of the recent enactment of the American Taxpayer Relief Act (ATRA), the Internal Revenue Service has to have time to test their software and design forms, so they have given producers more time to file,” says Ron Haugen, North Dakota State University Extension Service farm economist.

“Producers have until April 15 to file without penalty, but they need to include Form 2110F with their return for this waiver,” he says. “To qualify, at least two-thirds of the taxpayer’s gross income must be from farming in either 2011 or 2012. More guidance from the IRS will be forthcoming. The North Dakota State Tax Department also recognizes this waiver.”

Items to note for 2012 income tax preparation:

• The 179 expense election for 2012 was set at $500,000 retroactively because of the ATRA. Generally, the 179 expense election allows producers to deduct up to $500,000 of machinery or equipment purchases for the year of the purchase. There is a dollar-for-dollar phase-out for purchases of more than $2 million. It is scheduled to remain at $500,000 for 2013.
• The additional 50 percent first-year bonus depreciation provision is in effect for 2012. It is equal to 50 percent of adjusted basis after 179 expensing. It only applies to new property that has a recovery period of 20 years or less. It is scheduled to remain in effect for 2013.
• The standard deduction is $11,900 for those who are married and filing jointly. The deduction is $5,950 for singles.
• The personal exemption amount is $3,800.
• Long-term capital gains and qualified dividend income is taxed at a 0 percent rate for individuals in the 10 or 15 percent tax brackets and at 15 percent for those in the middle brackets and 20 percent for those in the top income bracket.
• The annual individual retirement account contribution is $5,000 for 2012 or $6,000 for individuals 50 or older.
• The annual gift tax exclusion is $13,000 and is set to increase to $14,000 for 2013.
• The 2012 Social Security wage base is $110,100.
• The business mileage rate for 2012 is 55 1/2 cents per mile.
• Crop insurance proceeds, if received in 2012, may be deferred to 2013 if you qualify. You must use cash accounting and show that, under normal business practices, the sale of damaged crops would occur in a future tax year.
• A livestock deferral can be made by those who had a forced sale of livestock because of a weather-related disaster.
• Remember that qualifying farmers can elect to compute their current tax liability by averaging, during a three-year period, all or part of the current year elected farm income. This is done on Schedule J. North Dakota farmers who elect to use income averaging for federal purposes also may use Form ND-1FA, which is income averaging for North Dakota income tax calculations.

Information on agricultural tax topics can be found in the “Farmers Tax Guide,” publication 225. It is available at any IRS office or can be ordered by calling (800) 829-3676. Any questions about these topics or further updates should be addressed to your tax professional or the IRS at (800) 829-1040 or http://www.irs.gov. Call the North Dakota Tax Department at (877) 328-7088 or go to http://www.nd.gov/tax/ for answers to North Dakota income tax questions.

NDSU Agriculture Communication - Feb. 6, 2013