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Wednesday, March 30, 2016

Special Notice for Ranchers Who Received IRS Correspondence Assessing Estimated Tax Penalties

We have become aware of several of our "early rancher" filers who have received IRS correspondence assessing penalties for failure to pay estimated tax. DO NOT PAY OR IGNORE THIS CORRESPONDENCE.  If you meet the Qualified Farmer criteria, you are not required to pay estimated taxes and the penalties will be waived.  However, you must respond to the notice in order for the penalties to be abated.  

You should always bring any official correspondence to the attention of your tax preparer BEFORE paying.  We are always available to review your correspondence and to respond on your behalf.  


The information below is from the IRS website and discusses the Special Estimated Tax Rules for Qualified Farmers:



Special Estimated Tax Rules for Qualified Farmers
Special rules apply to the payment of estimated tax by individuals who are qualified farmers. If you are not a qualified farmer as defined next, see Pub. 505 for the estimated tax rules that apply.

Qualified Farmer
An individual is a qualified farmer for 2015 if at least two-thirds of his or her gross income from all sources for 2014 or 2015 was from farming. See Gross Income , for information on how to figure your gross income from all sources and see Gross Income From Farming , for information on how to figure your gross income from farming. See also Percentage From Farming , for information on how to determine the percentage of your gross income from farming.

Special Rules for Qualified Farmers

The following special estimated tax rules apply if you are a qualified farmer for 2015.

  • You do not have to pay estimated tax if you file your 2015 tax return and pay all the tax due by March 1, 2016.
  • You do not have to pay estimated tax if your 2015 income tax withholding (including any amount applied to your 2015 estimated tax from your 2014 return) will be at least 662/3% (.6667) of the total tax shown on your 2015 tax return or 100% of the total tax shown on your 2014 return.
  •  If you must pay estimated tax, you are required to make only one estimated tax payment (your required annual payment) by January 15, 2016, using special rules to figure the amount of the payment. See Required Annual Payment for details.

Estimated Tax Penalty for 2015

If you do not pay all your required estimated tax for 2015 by January 15, 2016, or file your 2015 return and pay any tax due by March 1, 2016, you may owe a penalty. Use Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishermen, to determine if you owe a penalty. See the Instructions for Form 2210-F. Also, see the Instructions for Form 2210-F for information on how to request a waiver of the penalty.

*CAUTION*
If you receive a penalty notice, do not ignore it, even if you think it is in error. You may get a penalty notice even though you filed your return on time, attached Form 2210-F, and met the gross-income-from-farming requirement. If you receive a penalty notice for underpaying estimated tax and you think it is in error, write to the address on the notice and explain why you think the notice is in error.

Figure 15-1. Estimated Tax for Farmers