Cash Method Accounting Being Examined in Tax Reform

Cash Method Accounting Being Examined in Tax Reform

There are some tax reform changes being proposed in Washington D.C. that famers need to be aware. CliftonLarsonAllen Partner and Farm CPA Today Blogger Paul Neiffer shares more about these proposed provisions

Neiffer: “And there are two or three provisions that will dramatically affect farmers. The first key one is that they want to repeal the cash method of accounting for farmers if the gross income ends up being more than$10 million. A lot of farmers say that their income would never be over $10 million but if you have cattle operation or if they farm sort of loosely with some brothers or parents — all those sales have to be aggregated together and if the group goes over $10 all of the group.”

So what would this mean for farmers in this income bracket? Neiffer explains

Neiffer: “The negative with the accrual method of accounting is you are not allowed to defer any grain sales. Whatever the fair market value of your grain at the end of year — you have to pay tax on it — that is a big negative. We’re not even sure if farmers would be able to do pre-pays. We’re not even sure they will be to deduct all of their fertilizer costs in the year that they purchase it. So it is a pretty big negative.”

His blog, FarmCPAToday.com has plenty of good information.

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