Tax News & Views Farmer Filing and Peach Blossom Roundup

It's the first deadline of the tax season. Sort of. Today is the "Farmer deadline" for filing tax returns. What does that mean?

Farmers who receive at least two-thirds of their gross income from farming may be eligible for a special IRS filing rule. Instead of making quarterly estimated tax payments throughout the year, they can choose to file and pay their entire tax due by March 1. By meeting this deadline, they avoid underpayment penalties that would ordinarily apply if estimated taxes were not paid in quarterly installments. The deadline is March 3 this year because March 1 was on a Saturday.

This is a benefit available only to farmers and fishers. Other businesses, often less wealthy and with less time on their hands to deal with tax compliance, still have to make payments in April, June, September and January. But with 1099 information returns and K-1s needed for filing by many taxpayers coming out later, filing by March 1 becomes less practical and more expensive every year.

It's not really a return deadline. It a farmer files after today, the return is not considered a "late filing" for purposes of late filing and late payment penalties. Those only apply if a return isn't filed or extended by April 15. Even so, today can be an important deadline.

It's less important than many filers think. Many farmers carefully minimize their income each year using prepayments for inputs like feed, seed, and fertilizer. Such farmers often have minimal liability and minimal estimated tax payments due. Even so, I have seen farmers with tax liabilities of under $2,000, or even with losses, stressing out because of the "farmer deadline."

Are you really a "farmer?" A non-trivial population of taxpayers who try to meet the "farmer deadline" don't even qualify. That is because qualification is based on "gross" income. If a taxpayer has a K-1 from another investment - perhaps a community bank - that "gross income" must be considered in determining whether 2/3 of income is from farming. Gross income will be higher, often much higher, than the "bottom line" income on the K-1. This is especially likely to be an issue when such a farmer has minimized farm income by deferring sales revenue.

There is another way. Instead of aiming for the March 1 deadline, farmers are allowed to make only one estimated tax payment by January 15 and then file their return by the regular April deadline - or extend if they are still waiting on other tax information. This approach still allows farmers to avoid quarterly payments without dealing with March 1 filing.

Beneficial Ownership Reporting Called Off for Domestic Reporters

Treasury Exempts Domestically-owned Entities from Ownership Reporting - Adam Sweet, Eide Bailly. "It appears BOI reporting is indefinitely paused for domestic companies with no foreign ownership."

BOI Whiplash: Domestic Companies Now Exempted - Thomas Gorczynski, Tom Talks Taxes:

The forthcoming new reporting rule will exempt domestic reporting companies, including limited liability companies (LLCs) and corporations formed under state law, from the BOI reporting requirement. In addition, FinCEN will not take enforcement actions against domestic reporting companies that do not meet the BOI reporting requirement under the current rule.

BOI reporting is dead for domestic reporting companies. These entities do not need to file any BOI reports going forward, including by the previously announced March 21, 2025 deadline.

Tariff Time

China Signals Retaliation Following Extra 10% US Tariff - Natalie Olivo, Law360 Tax Authority ($). "China "will take all necessary countermeasures" in response to the Trump administration's plans to impose an additional 10% levy on Chinese imports starting March 4, according to a translated statement from Chinese Ministry of Commerce. The 10% levy, which Trump set up Thursday, follows a separate set of tariffs the U.S. government announced in late January, including 10% China tariffs, along with a 25% levy on goods from Mexico and Canada."

‘How Are We Going to Afford This?’ U.S. Companies Face Tariff Reality. - Daisuke Wakabayashi, Alexandra Stevenson, Danielle Kaye, and Eli Tan, New York Times:

The New York Times has heard from nearly 100 companies that import from China about how the president’s tariffs were affecting them. They are a cross-section of striving enterprises stitched into the global economy: companies that make greeting cards, board games, outdoor footwear, hangers, digital picture frames, coffee equipment, toys, stained-glass windows and custom electronics.

Several themes emerged. American businesses, not Chinese suppliers, were shouldering the cost of tariffs. Many companies said they would have to raise prices to offset the expense if they had not already. Some spoke of a feeling of business paralysis: They were afraid to make plans amid the unpredictable stream of new tariffs, fearing the risk of moving production out of China since no country seemed immune.

How Donald Trump’s tariffs threaten an iconic US pick-up truck - Kana Inagaki, Paul Caruana Galizia, Ian Bott, Bob Haslett and Chris Cook, and Claire Bushey, Financial Times. "The high-margin General Motors model, which costs roughly $40,000-$70,000, relies on one of the most complex, international and interconnected automotive supply chains, making it particularly vulnerable to the US president’s threat to impose 25 per cent tariffs on Canada and Mexico."

Warren Buffett calls Trump’s tariffs a tax on goods, says ‘the Tooth Fairy doesn’t pay ‘em’ - Yun LI, CNBC:

“Over time, they are a tax on goods. I mean, the Tooth Fairy doesn’t pay ’em!” Buffett said with a laughter. “And then what? You always have to ask that question in economics. You always say, ‘And then what?’”

This marks the first public remark from the 94-year-old “Oracle of Omaha” on Trump’s trade policies. Last week, Trump announced that the sweeping 25% tariffs on imports from Mexico and Canada will go into effect March 4 and that China will be charged an additional 10% tariff on the same date. China has vowed to retaliate.

Tax Administration in Crisis

More IRS Officials Retire Amid Leadership Shake-Up - Benjamin Valdez, Tax Notes ($):

The deputy commissioner of the IRS Small Business/Self-Employed Division and the agency’s longtime communications chief are retiring as Melanie Krause takes over as acting commissioner.

SB/SE Deputy Commissioner Maha Williams has retired from the IRS, SB/SE Commissioner Lia Colbert announced in a February 28 message to employees viewed by Tax Notes. Williams “guided the design, development, and delivery of a comprehensive tax administration program to meet the needs of over 57 million small business owners and self-employed taxpayers,” Colbert said.

IRS Employees Told to Return to the Office by March 10 - Erin Slowey, Bloomberg ($):

Friday’s guidance, issued in a memorandum posted on the National Treasury Employees Union’s website, applies to all Treasury and IRS employees—including those in the bargaining unit—within 50 miles of an office.

Agencies were given a roughly 30-day target deadline to fully comply with the Trump administration executive order bringing federal employees back into the office full time in late January. About 72% of IRS employees had some option for telework....

NTEU told its members it will file a national grievance and unfair labor practice charge covering each member.

What in the DOGE is happening at the IRS? - Jacob Bogage, Meryl Kornfield and Patrick Svitek, Washington Post:

Then we get to Thursday and Friday, and significant developments unfold:

...

- A new DOGE official, Sam Corcos, arrives at IRS headquarters and demands detailed taxpayer and vendor information. DOGE presses IRS lawyers to authorize an “omnibus” agreement that would allow federal agencies to cross-reference benefits rolls with taxpayer data to search for fraud.

- The White House asks Congress to cut $20.2 billion from the IRS as part of legislation to avert a government shutdown (as scooped by CQ/Roll Call’s eagle-eyed appropriations reporter Aidan Quigley). I can confirm Aidan’s reporting, according to records I’ve obtained.

Put that all together, and what do you get? An unprecedented attack on the U.S. tax system in the middle of filing season,employees at all levels of the agency tell me.

And in Congress...

GOP Wants $4 Trillion Tax Cut to Look Like Nothing - Richard Rubin, Wall Street Journal:

Republicans are readying an untested and aggressive move—a blatant gimmick, critics say—that would declare that Congress can extend expiring tax cuts and record no costs. House Republicans didn’t attempt the maneuver in the budget they passed this week. Key GOP senators are eager to try it.

Their push would likely lead to a high-profile Senate vote over a $4 trillion accounting question with significant implications for how deeply and permanently Republicans will cut taxes.

Trump Bends Congress to His Will on Spending, Tax Cut Agenda - Erik Wasson and Steven Dennis, Bloomberg via Yahoo!News:

In the Senate, Republicans are eyeing a budget gimmick counting the extension of Trump’s 2017 tax cuts as zero dollars because it’s current policy. That gives them ample room for even more breaks for businesses and individuals.

Republican House Speaker Mike Johnson, who discussed the idea last week with Trump and Senate Majority Leader John Thune, would need to sell fiscal hawks on it. But several, like Texas Representative Chip Roy, have signaled they’d go along with it, in exchange for another trillion dollars in spending cuts.

That could lift the $10,000 cap on the state and local tax deduction and end the estate tax, while stopping taxes on tips, overtime and Social Security benefits. Trump may even be able to convince Congress to go along with $5,000 stimulus checks he as floated.

In other news

Coca-Cola Calls on Loper Bright to Boost Transfer Pricing Appeal - Caleb Harshberger and Michael Rapoport, Bloomberg ($):

Eide Bailly principal Chad Martin said he doesn’t see Loper Bright as the main pillar of the company’s case. “There’s a reason they listed this one third in the list here,” he said.

The argument over the switch in methods “did not hold up at the Tax Court, and I think the big difference now, or what Coca-Cola is really banking on, is they now have what you might perceive to be a more favorable audience at the judicial and administrative levels,” he said.

Blogs and Bits

Oscars swag bags hold $220,000 in taxable goodies - Kay Bell, Don't Mess with Taxes. "Distinctive Assets’ announcement lists all the gifts and the companies providing them. It doesn’t include values, but several reports, such as this one from Business Insider via Yahoo and CNBC Make It, put price tag numbers on some of the items."

How to Get Assistance During the Filing Season - Erin Collins, NTA Blog. "Free filing and assistance are available through the Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly (TCE), Free File, Direct File, and MilTax programs, along with many private software companies. Taxpayers may also seek IRS assistance electronically using online accounts or in person at a Taxpayer Assistance Center (TAC). Each method of assistance, as discussed below, has different qualifications and features and taxpayers should look at each one before deciding which is best for them."

The Role of LIFO in the Tax Code - Alex Muresianu Alex Durante, Tax Foundation. "The LIFO inventory method allows companies to deduct the cost of inventory at the price of the most recently acquired items and assumes that the last inventory purchased is the first to be sold. The first-in, first-out (FIFO) inventory method, by contrast, allows companies to deduct the cost of inventory at the price of the oldest acquired items and assumes the first inventory purchased is the first to be sold."

The Wrong Tool for the Job

Tool Tax Shelter Attorney Can’t Refight Penalties - Nathan Richman, Tax Notes ($):

Davison was involved with a business called Cash Management Systems (CMS) from 1999 to 2010, providing tax and legal advice, according to the Tax Court’s 2020 decision upholding the penalties. That included a period during which he managed CMS’s client account while working for Grant Thornton LLP until 2002.

CMS offered so-called tool plan tax strategies that the IRS has determined to be tax shelters. The Tax Court described the plans, saying, “CMS designed its tool plans to allow both employers and employees to claim substantial tax savings by bifurcating an employee’s base pay into a taxable labor portion and a nontaxable portion for tool reimbursement or use.”

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It's Peach Blossom Day! They say we might have a blizzard here tomorrow, but it's a nice thought.

Tax News & Views Farmer Filing and Peach Blossom Roundup

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Joe B. Kristan, CPA