Farm Income Tax Management and Reporting: Reference Manual

Abstract

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) includes many changes in the tax laws, a few of which become effective in 1982. Many more changes will become effective in 1983 and later years. Since the Act was designed to produce more than $98 billion in additional revenue, there is little good news to be found in the new provisions. Some of the provisions of TEFRA modify provisions of ERTA which was enacted only a year earlier. Modifications were made in ACRS, investment credit and safe-harbor leasing rules. The basic tax rate reductions of ERTA remain in effect, as does the inflation adjustment (indexing) scheduled to become effective in 1985. Most of the provisions of TEFRA are not modifications of ERTA. The changes are too numerous to cover in this publication

we have concentrated likely to affect farmers. Tax practitioners will need to study the law carefully in order to understand the many rather complicated changes. Most of the tax changes effective for 1982 are the good news provisions included in ERTA. They include the 10 percent cut in individual tax rates and the second year of cost recovery under ACRS. In general, the farm economy is in the doldrums. Dairy farm incomes are likely to be down in 1982 because costs have continued to increase but the price of milk has stabilized. Records from 83 CAMIS dairy farmers show an average 10 percent decrease in January-August operating margins from the same period in 1981. Current legislation will make 1983 milk prices lower than 1982 unless policy is altered. Some dairymen will have enough net income in 1982 to be looking for ways to save taxes. Grain farmers are not likely to have high net incomes because prices are rather low. Fruit growers generally had a good 1982 crop but prices are somewhat depressed. Hog producers may be in a high income position because of higher prices than in 1981 but many will be able to reduce income taxes by carry forward of investment credit and net operating losses or by income averaging. Incomes of egg producers are likely to be below 1981 levels. A carryback of net operating losses may provide tax relief to some New York farmers in 1982.