2012 tax management strategies
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2012 Tax Management Strategies. Catawba Cattleman’s Association Newton, NC October 9, 2012. Knowing Your Numbers. If you can’t measure it, you can’t manage it Bring your records up to date 1 st 10 months actuals, project Nov & Dec for net total income Calculate a projected tax bill. - PowerPoint PPT PresentationTRANSCRIPT
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2012 Tax Management Strategies
Catawba Cattleman’s AssociationNewton, NC
October 9, 2012
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Knowing Your Numbers• If you can’t measure it, you can’t
manage it• Bring your records up to date
–1st 10 months actuals, project Nov & Dec for net total income
–Calculate a projected tax bill
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Plan to a “set” target net income• Increase expenses
in last 2 months• Defer income into
2013• Take more income
in 2012• Defer expenses
until 2013
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Increasing Expenses if need be• Prepay expenses
– Generally 50% rule– Ex: $30,000 in total
expense, then $15,000 of prepay allowed
– REMEMBER, expenses in 2012 increase 2013 income
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Increasing Expenses if need be• Use Sec. 179
expensing – Used and new equip– $136,000 is limit– $560,000 total
purchase limit– Must have income
• Farm or W-2
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Increasing Expenses if need be• Use AFYD or Bonus
– New equip only– Presumption of law
this is used, – Must elect out by
class– NC does not
conform to federal law
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Examples of Farm Income?• Market calf sales• Grain sales• Cotton sales• Custom work• Gov’t payments• Crop Insurance
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What is a Farm Business Asset Sale?
• Land used in farming
• Breeding animals• Equipment sales
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Where are Business Asset Sales Reported?
• IRS Form 4797• Part 1
– Land– Raised Breeding
Animals (held >2 yrs)
• Part 3– Depreciated Equip– Purchased
Breeding Animals
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Remember the Plan: An Income Target
• W-2 income• Rental income• Farm Income• Other investments• Character of
income– Ordinary, Capital
Gains, SE taxable
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A pitfall to watch out for…• Repair vs. Capital
Expense– Rule: Adds value,
life or changes use, it’s capital and depreciate the cost
– Ordinary and necessary, repetitive…it’s a repair
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A few non Business Ideas to Optimize Tax Paid
• Retirement Plans – IRA, SEP, SIMPLE
• H.S.A.– Can act like an IRA
• Double Up Itemized Deductions– Property taxes,
estimated State tax
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If…A Farm Loss• Consider paying
alternative SE tax– Allows for continuing
coverage for retirement and more importantly disability
– Often paid by the EIC if qualified.
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Super Good year: Now What? Income Averaging may Help
• The idea is to use unfilled lower tax bracket buckets from the previous three years.
• Farm income– Schedule F– Sale of Farm
Business Assets
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Useful Tax Websites• www.ruraltax.org• www.smbiz.com• www.timbertax.org• www.irs.gov• www.dornc.com
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Contact Information
Guido van der HoevenExtension Specialist/ Senior LecturerCampus Box 8109, NCSURaleigh, NC 27695-8109