03/01/07 Surprise: withholding on farm payments

Farm and Ranch March 1, 2007 The last tax bill that Congress passed in 2006 contained a provision that placed a three percent withholding on all government payments to contractors. The provision also includes agricultural payments to farmers and ranchers. Wolff: "What that means is any time the government writes a check to a contractor or to a farmer they will withhold three percent of the payment because they are assuming that taxes will be due on that money at the end of the year." That's American Farm Bureau tax specialist Pat Wolff who says farm income is so variable that some years farmers don't owe taxes, so this new rule is not fair. Wolff: "That's like the farmer making an interest free loan to the government for the year." Wolff says the new rule does not take effect until 2011 so there's time to repeal the provision. Wolff: "The provision was inserted in the bill without ever having passed the House and Senate, so there are sympathetic ears to try to repeal the provision. But the unfortunate part is now it's in law, which means if it were to be repealed another tax would have to raised to make up the revenue lost to the government." Legislation has been introduced in the House and soon will be in the Senate as well, to repeal the three percent withholding. The American Farm Bureau is urging as many members of Congress as possible to sign onto those bills. I'm Bob Hoff and that's the Northwest Farm and Ranch Report on the Northwest Ag Information Network