Thu, 06 Oct 2022 11:59:12 CDT
Now is the time of year for producers to start thinking about having things in line for their taxes. KC Sheperd, Farm Director, visited with JC Hobbs, Oklahoma State University Extension Tax Specialist, talking about what producers should be doing now, and some tips to help them utilize resources available to them.
“Producers need to be aware of if they have sold animals due to the drought conditions in Oklahoma,” Hobbs said. “These are animals in excess of what they would normally sell so they could get some relief on their pasture possibly.”
For producers selling livestock that they would not normally sell in a year with ideal weather conditions, they need to be sure to document the number of animals sold in excess of normal for 2022.
“This is fairly simple,” Hobbs said. “Basically, you are looking, going back '21, '20 and ’19 as being what we would consider our normal years. Then, this year, we compare that to the three-year average, and anything in excess of the three-year average would be our sales in excess of normal and then we would basically keep track of that number and either report the excess in 2023 as sales because they would have normally been sold after the first of the year, or if they are breeding livestock, we can elect to then postpone recognition of that gain by determining on the tax return that we want to buy them back and have them bought back within basically two years from the time they were sold- two years after the drought ends.”
However, Hobbs said for Oklahoma, every county has been given a federal disaster regulation that now allows them four years to buy their livestock back, so instead of having to buy them back by the end of 2024, they will have until the end of 2026 to repurchase the same dollar amount of what was sold.
Hobbs said it is important to discuss your tax options with your tax advisor before you file so everyone is on the same page.
“What is going on here is depending upon what all has taken place in the last few years,” Hobbs said. “As an example, if you have had some losses on your tax return from the last couple of years and those losses have carried forward, it might be wise to go ahead and pay the losses this year on the sale of those excess animals and absorb some of that loss.”
Instead of buying back animals and making that election, Hobbs said it may be better to go ahead and report all the income in 2022 or spit in between 2022 and 2023 instead of buying them back.
“There are a lot of opportunities here and a lot of it depends on what the farmer or rancher decides they want to do,” Hobbs said.
First and foremost, Hobbs said producers need to keep their sale information up to date and on hand. They also need to print out the drought monitor online when they sell certain livestock to show the state of their area during that time.
Hobbs also said to keep track of the excess hay sales and the transportation costs of hay.
To visit OSU Extension's Drought Resource Page, click here.
To read Sales Tax Rules for Farmers Markets and On-Farm Sales: The Exemption Ends at the Farm Gate from OSU Extension, click here.
Click the LISTEN BAR below to listen to KC Sheperd and JC Hobbs talking about preparing for tax season.