Your Social Security Benefits May Be Taxable

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For questions about tax planning, estate and trust planning, or past due taxes and filings, call Kevin M Sayed, J.D., LL.M. Taxation, at 252-321-2020. All material originally published in IRS Tax Tip 2016-18:  Your Social Security Benefits May Be Taxable.

 Your Social Security Benefits May Be Taxable

If you receive Social Security benefits, you may have to pay federal income tax on part of your benefits. These IRS tips will help you determine if you need to pay taxes on your benefits.

  • Form SSA-1099.  If you received Social Security benefits in 2015, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of your benefits.
  • Only Social Security.  If Social Security was your only income in 2015, your benefits may not be taxable. You also may not need to file a federal income tax return. If you get income from other sources you may have to pay taxes on some of your benefits.
  • Free File.  Use IRS Free File to prepare and e-file your tax return for free. If you earned $62,000 or less, you can use brand-name software. The software does the math for you and helps avoid mistakes. If you earned more, you can use Free File Fillable Forms. This option uses electronic versions of IRS paper forms. It’s best for people who are used to doing their own taxes. Free File is available only by going to IRS.gov/freefile.
  • Interactive Tax Assistant.  You can get answers to your tax questions with this helpful tool and see if any of your benefits are taxable.  Visit IRS.gov and use the Interactive Tax Assistant tool.
  • Tax Formula.  Here’s a quick way to find out if you must pay taxes on your Social Security benefits: Add one-half of your Social Security to all your other income, including tax-exempt interest. Then compare the total to the base amount for your filing status. If your total is more than the base amount, some of your benefits may be taxable.
  • Base Amounts.  The three base amounts are:
    • $25,000 – if you are single, head of household, qualifying widow or widower with a dependent child or married filing separately and lived apart from your spouse for all of 2015
    • $32,000 – if you are married filing jointly
    • $0 – if you are married filing separately and lived with your spouse at any time during the year

Ten Key Tax Tips for Farmers and Ranchers

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 All material originally published by the IRS as, IRS Tax Tip 2016-15:  Ten Key Tax Tips for Farmers and Ranchers. For help with tax planning, business planning, or estate planning for farmers contact Kevin M Sayed, J.D., LL.M. Taxation, at 252-321-2020, or ksayed@ck-attorneys.com, with Colombo Kitchin attorneys.

Ten Key Tax Tips for Farmers and Ranchers

Farms include ranches, ranges and orchards. While some may raise cattle, poultry or fish and others grow fruits or vegetables, all will report their farm income on Schedule F, Profit or Loss from Farming. If you own a farm or ranch, here are 10 tax tips:

  1. Crop insurance. Insurance payments from crop damage count as income. Generally, you should report these payments in the year you get them.
  2. Sale of items purchased for resale.  If you sold livestock or items that you bought for resale, you must report the sale. Your profit or loss is the difference between your selling price and your basis in the item. Basis is usually the cost of the item. Your cost may also include other expenses such as sales tax and freight.
  3. Weather-related sales. Bad weather such as a drought or flood may force you to sell more livestock than you normally would in a year. If so, you may defer tax on the gain from the sale of the extra animals.
  4. Farm expenses. Farmers can deduct ordinary and necessary expenses they paid for their business. An ordinary expense is a common and accepted cost for that type of business. A necessary expense means a cost that is proper for that business.
  5. Employee wages. You can deduct wages you paid to your farm’s full- and part-time workers. You must withhold Social Security, Medicare and income taxes from their wages.
  6. Loan repayment. You can only deduct the interest you paid on a loan if the loan is used for your farming business. You can’t deduct interest you paid on a personal loan.
  7. Net operating losses.  If your expenses are more than income for the year, you may have a net operating loss. You can carry that loss over to other years and deduct it. You may get a refund of part or all of the income tax you paid in prior years. You may also be able to lower your tax in future years.
  8. Farm income averaging.  You may be able to average some or all of the current year’s farm income by spreading it out over the past three years. This may cut your taxes if your farm income is high in the current year and low in the prior three years.
  9. Tax credit or refund.  You may be able to claim a tax credit or refund of excise taxes you paid on fuel used on your farm for farming purposes.
  10. Farmers Tax Guide. For more details on this topic see Publication 225, Farmer’s Tax Guide. You can get it on IRS.gov/forms anytime. You can order it on IRS.gov/orderforms to have it mailed to you.