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June 15th – due date for second quarter tax estimates. Rules somewhat unclear for these estimates. Not sure how income is taxed. In particular Section 199A.

Section 199A – we are not talking about the grain glitch and subsequent patch passed back in March. We are talking about “regular” 199A for this podcast. For a farmer, assume you sell all grain to a private elevator (sell nothing to co-op_. What are the questions that we still have? Note: IRS has said that guidance will be released by the end of this month.

199A refresher – you get a 20% deduction on your business income. Income of $100K, pay tax only on $80K. Subject to wage limitations and capital invested once you exceed $315K of taxable income. Wages need to be 40% of net income to get the full 20% deduction.

Open Items:

What is a trade or business? In particular, will farmland cash rent be eligible for the 20% deduction?
Self rental - ok? The farm that you own and run pays rent to an LLC where you and your family own the land
Crop share – ok?

Wages – can I combine wages from different entities together?
What if I have a trucking business, farming business, and custom harvesting business. Do I need to pay wages out of each entity?

How do the wage and property rules work when I sell my business?
What if I sell in January (then not much wages) vs. sell late in the year?
What if I have no equipment on hand at end of year because sold it all – do I get anything deduction assuming no wages paid?

How do certain page 1 deductions factor in for the sole proprietor or active partner? Deductions that don’t show up on Sch F. Do these deductions reduce the 20% benefit?
Self employed health insurance
SEP retirement plan contribution
50% of Self employment tax

Big picture is that we expect guidance soon, and there may need to be action taken. Could be busy July/Aug for CPAs.

For more information Glen may be contacted at 309-694-4251, on Twitter @glenbirnbaum, or at www.hbcpas.com

Glen heads the Consulting and Business Valuation department at the Firm Hienold Banwart and holds three business valuation appellations: Certified Valuation Analyst (CVA), Accredited in Business Valuation (ABV), and Accredited Senior Appraiser (ASA) of the American Society of Appraisers. He has more than 18 years of experience in valuing closely held businesses and also holds the Certified Merger & Acquisition Advisor (CM&AA) credential.