Eighth Circuit Determines CRP Payments Are Not Subject to SE Tax for Non-Farmers

By Joshua A. Diveley.

The U.S. Court of Appeals for the Eighth Circuit has reversed a prior decision of the U.S. Tax Court and found that Conservation Reserve Program (CRP) payments made to non-farmers constitute rentals from real estate for purposes of §1402(a)(1) and are excluded from the self-employment tax.

The Tax Court previously ruled in favor of the IRS and found that a non-farmer who inherited rental farm ground, signed a CRP agreement with the federal government and engaged agents to perform the landowner’s requirements under the agreement was in the trade or business of farming and was therefore subject to self-employment tax on the CRP payments.

The Eighth Circuit reversed the decision and determined that prior IRS guidance and court cases have found that a non-farmer should be distinguished from an farmer active in the farming operation and applied that distinction to the present facts.

See Rollin Morehouse v. Commissioner of the IRS available at: http://media.ca8.uscourts.gov/opndir/14/10/133110P.pdf

© 2014 Parsonage Vandenack Williams LLC

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Proactively Acquire Social Media Usernames for Your Business

If you own or start a business, a key marketing channel is social media. Many businesses acquire accounts for the social media platforms they intend to use as the need arises. But, only acquiring usernames and accounts for the services you intend to use may be an incomplete solution. In fact, you should sign up for and acquire all usernames across all social media platforms that you might want to use or may want to protect.

Even if you have a trademark, you may not be protected from third parties using your business’s name as a social media username. If someone else claims your trademark or uses your trademark in a social media setting, your rights may be limited, especially if the person using it does not use it for commercial purposes or in a way that creates confusion about your brand. To protect a company or brand name, as a best practice, you should sign up for as many usernames that could be confused with your brand name as possible on a broad variety of social media platforms.

© 2014 Parsonage Vandenack Williams LLC

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Government Shutdown Has No Impact on Tax Deadlines

The IRS has issued a notice that the partial shutdown of the federal government does not affect federal tax law requirements.  Taxpayers with six-month extensions to file a return that expire on October 15th are still required to comply with this deadline.  Individuals and businesses are also still required to file tax withholdings and make deposits with the IRS as required.

© 2013 Parsonage Vandenack Williams LLC

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Travel Expense Deductions

You may be able to deduct travel expenses from your residence to your workplace.  Generally, these are nondeductible personal expenses.  However, you can take advantage of three exceptions to this rule.

  1. Home Office Exception: Consider using your home as your principal place of business.  If you have a home office, you can deduct any travel expenses to regular or temporary work locations.
  2. Temporary Distant Workplace Exception: Consider whether temporary work locations will be outside of the metropolitan area of where you work and live.  You can deduct travel expenses to any temporary work locations outside of your metropolitan area.
  3. Regular Work Location Exception: If temporary work locations are not outside of your metropolitan area, be sure you have a regular work location.  If you have a regular work location, all travel expenses to temporary work locations will be deductible.  Regular work locations do not include locations where you are considered a customer (bank, supply store, etc.).

© 2013 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

Self-employment Taxes and Deductions

If you are self-employed, you should keep in mind several major potential tax issues this year. First, be aware of whether you are self-employed. If you work out of your home part-time in addition to your regular job, you are likely subject to self-employment taxes. If you are self-employed, you will need to file some additional forms with your 1040.  These include Schedule C or Schedule C-EZ, and Schedule SE. You will use Schedule SE to figure out what self-employment tax you owe in addition to your regular income tax.

Self-employed taxpayers can take some additional deductions. Most of the costs you paid to run your trade or business are deductible. The deductibility standard is one of whether the expenses are “ordinary and necessary” to operate your business. If an expense is common or accepted in the trade, it is ordinary. If it is helpful and appropriate for your trade or business, it is necessary. You may have to capitalize some costs, rather than deducting them in full. That means you will deduct part of the expense each year for multiple years. Self-employed taxpayers should generally make estimated tax payments. If you are required to do so and do not make the payments, you may be subject to penalties.

There are a variety of tax deferred retirement plan options available to the self-employed taxpayer. Contributions to such plans can substantially reduce current income taxes.

© 2013 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com