Dale in IN
Member
In answer to yesterdays question by kswillie. Markb_Mi is closer to being right than most of the others.
Where I am coming from on this I have and own my own tax practice. And have prepared taxes for 25 years and have attended tax classes on this very subject.
Commodity wages are not illagal. but they must be handled properly. Hauling the commidity to the elevator and have the elevator man cut the employee a check for so many bushels is the same as a cash payment and is subject to Soc Sec and Med. taxes. However the employee must recieve the commodity directly and have controll over it and deliver in a seperate transaction and store or sell it in his name, that is legal.
When he recieves the commodity he has a capital asset and it can be sold as such. He should declare the commodity as other income (as he is not in business for himself) at its Fair Market Value (FMV) in year he recieves it. Not subject to Soc Sec or Med Tax. Then when he sells the commodity he will have a capital gain or loss either short or long term. Short term is taxed as ordinary income and long term (held over a year) would be subject to possabilly a lower income tax rate. And his basis in the commodity would be the FMV that he has paid the Income taxes on. Now if he has a loss he can only deduct $3000.00 per year on a MFJ return and the excess has to be carried forward to the next tax year.
If he recieves the commodity as a gift and then sells it. (Still a capital asset). At a Gain his basis is the farmers basis at the time of the gift, which is $0.00 for he the farmer has allready deducted the cost of producing the commodit in his expenses and would declare the the sale of the commodity as income.
Now if the donee sells at loss then his basis is the FMV at the time he recieved the commodity. The donee"s holding period begains when the farmer planted the commodity.
And the amount that a Doner can gift is $13000.00 to any 1 Donee in a year. With a life time exclusion of $1,000,000.00.
As far a workmans comp insurance I would not worry about that for if you get hurt and you have insurance from your retirement or Medicare You will still recieve you Soc Sec. I would make sure he carries Liability Insuranc though.
The Max that you can earn before reaching full retirement age is now $14160.00 for 2011. If you go over that a mount they will cut your Soc Sec by $1.00 for every $2.00 you earn over that amount. I hope this helps to clear up some of the mis understanding.
Dale in IN
Where I am coming from on this I have and own my own tax practice. And have prepared taxes for 25 years and have attended tax classes on this very subject.
Commodity wages are not illagal. but they must be handled properly. Hauling the commidity to the elevator and have the elevator man cut the employee a check for so many bushels is the same as a cash payment and is subject to Soc Sec and Med. taxes. However the employee must recieve the commodity directly and have controll over it and deliver in a seperate transaction and store or sell it in his name, that is legal.
When he recieves the commodity he has a capital asset and it can be sold as such. He should declare the commodity as other income (as he is not in business for himself) at its Fair Market Value (FMV) in year he recieves it. Not subject to Soc Sec or Med Tax. Then when he sells the commodity he will have a capital gain or loss either short or long term. Short term is taxed as ordinary income and long term (held over a year) would be subject to possabilly a lower income tax rate. And his basis in the commodity would be the FMV that he has paid the Income taxes on. Now if he has a loss he can only deduct $3000.00 per year on a MFJ return and the excess has to be carried forward to the next tax year.
If he recieves the commodity as a gift and then sells it. (Still a capital asset). At a Gain his basis is the farmers basis at the time of the gift, which is $0.00 for he the farmer has allready deducted the cost of producing the commodit in his expenses and would declare the the sale of the commodity as income.
Now if the donee sells at loss then his basis is the FMV at the time he recieved the commodity. The donee"s holding period begains when the farmer planted the commodity.
And the amount that a Doner can gift is $13000.00 to any 1 Donee in a year. With a life time exclusion of $1,000,000.00.
As far a workmans comp insurance I would not worry about that for if you get hurt and you have insurance from your retirement or Medicare You will still recieve you Soc Sec. I would make sure he carries Liability Insuranc though.
The Max that you can earn before reaching full retirement age is now $14160.00 for 2011. If you go over that a mount they will cut your Soc Sec by $1.00 for every $2.00 you earn over that amount. I hope this helps to clear up some of the mis understanding.
Dale in IN
