IRS Guidance for Farmers; The Internal Revenue Service (IRS) & the Treasury Department issues guidelines & detailed procedures for farmers on uniform capitalization rules. Those U.S. farmers who have elected out of certain capitalization rules and want to apply the small business taxpayer exemption in the same taxable year can get the guidance from Revenue Procedure 2020-13 (PDF).

U.S. Farmers’ Guidance Regarding Uniform Capitalization Rules:

  • A provision has been added in the Tax Cuts and Jobs Act (TCJA) that exempts small business taxpayers from the capitalization rules under section 263A.
  • A taxpayer fulfills the eligibility criteria of being a small business taxpayer if he satisfies the IRS in the gross receipts test for the taxable year.
  • It must be noted that a tax shelter is excluded for this qualification as a small business taxpayer.
  • In order to satisfy gross receipts test successfully, a farming business in USA must have gross receipts of equal to or less than $25 million for taxable years beginning in 2018, while of equal to or less than $26 million for taxable years beginning in 2019.
  • For using the Alternative Depreciation System (ADS) or characterization of certain property as section 1245 property, the small business taxpayer exemption does not involve the special rules. It is in contrary to the section 263A(d)(3) election.

Purpose of Farmer Guidelines on Capitalization:

  • The latest guidance from IRS for the farmers in USA is involved in many important procedures of farming business.
  • First is, the procedures for revoking of farmers election under section 263A(d)(3) is provided in the guidance.
  • The second is, the procedure for application of farmers for the small business taxpayer exemption under section 263A(i) in the same taxable year is also described in the guidance.
  • The eligible farmers can also get guidance from the revenue procedures if they would like to put together an election under section 263A(d)(3) in the same taxable year that they no longer meet the criteria as small business taxpayers.

Recently, IRS also issued tax deadline for farmers which is 2nd March, 2020 for the current year. If you are in panic that how to prepare and file returns quickly within deadline, Black Ink can help you in this regard. Feel free to contact us for the accurate filing of your returns.





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