March 1 is Not a Due Date

It appears this is our week for discussing March 1 farm filers. We have gotten a few comments or emails regarding the farmer’s “due date”. March 1 is not a due date for farmers. The due remains April 15 (or the 18th this year).

March 1 simply allows the farmer not to have to pay any estimated taxes on January 15. The due date for the farmer remains April 15. This means the deadline for making an IRA contribution or other retirement plan contribution still remains April 15 even if the farmer has filed their return on March 1.

Any other tax item with an April 15 due date still remains April 15 even if the farmer files by March 1.

The media and many tax practitioners continue to refer to it as the Farmer Due Date. This is wrong. It is simply an option to allow farmers not to pay the estimated tax payment on January 15. We hope that repeating this will reinforce that it is not a due date.

Also, remember that many farmers no longer qualify as a “farmer” for estimated tax purposes which means that they will need to make four estimated tax payments (April 15, June 15, September 15, and January 15). In order to qualify as a farmer, at least two-thirds of gross receipts must be from farming. The gain from trading in farm equipment is not considered gross receipts from farming. Farmers with a large amount of gains from equipment trades may not qualify as a farmer for estimated tax purposes. They continue to qualify as a farmer for farm income averaging but not estimates.

Also, you can qualify either for the current year or the previous year so that does give you flexibility. But we have seen many “farmers” no longer qualify due to equipment gains and other non-farm income exceeding one-third of gross receipts on a consistent basis.

Here is an example:

Jane has gross receipts from farming of $1.3 million. She also consistently trades in a tractor or combine every year that generates $350,000 of gains. She also has other income from rents, interest, dividends, etc. of $155,000 and is an investor in a ethanol plant that her share of gross receipts is $275,000 annually. Her total gross receipts is $2,080,000 and her share from farming is only 62.50%. Therefore, she is not considered to be a farmer.

The bottom line is if you typically file on March 1, we would suggest simply paying the January 15 estimate. It is easy and trying to file by March 1 will only continue to get worst each year.