Outlook and Policy Meeting Schedule

The Farm Bill, grain and biofuel markets, agricultural law and farm input costs are just some of the topics being covered during this year’s Ohio State University Agricultural Outlook and Policy Program.

The program, sponsored by the Department of Agricultural, Environmental, and Development Economics, features news and information from department experts on the status of food, farm, and environmental policies and markets. Meetings will be held at 11 Ohio locations this winter, beginning on Nov. 6 and running through Jan. 29.

The Agricultural Outlook and Policy Program schedule is as follows:

  • Nov. 6, Wilmington , lunch; topics include grains, policy, inputs, and ag law. For more information, contact Tony Nye at (937) 382-0901.
  • Nov. 8, Jefferson , lunch; topics include grains, dairy, food trends and market opportunities, and ag law. For more information, contact David Marrison at (440) 576-9008.
  • Nov. 28, Plain City , lunch; topics include grains, policy, inputs, ag law, and other economic highlights. For more information, contact Eric Imerman at (740) 852-0975.
  • Nov. 28, Hillsboro , dinner; topics include grains, policy, ag law, food trends and markets. For more information, contact John Grimes at (937) 393-1918.
  • Dec. 3, Upper Sandusky , dinner; topics include grains, policy, inputs, ag law and other economic highlights. For more information, contact Chris Bruynis at (419) 294-4931.
  • Dec. 4, Ashland , lunch; topics include grains, policy, China and trade, and food trends and markets. For more information, contact Valerie Bumb at (419) 426-8255 or Ed Lentz at (419) 447-9722.
  • Dec. 6, Lima , dinner; topics include grains, policy, inputs, China and trade, and other economic highlights. For more information, contact Curtis Young at (419) 222-9946.
  • Dec. 7, Versailles , breakfast; topics include grains, policy, inputs, China and trade and other economic highlights. For more information, contact Steve Foster at (937) 548-5215.
  • Dec. 10, Lancaster , dinner; topics include grains, policy, ag law, and food trends and market opportunities. For more information, contact Mike Estadt at (740) 474-7534.
  • Jan. 29, Ridgeville Corners, dinner; topics include grains, policy, inputs, China and trade and other economic highlights. For more information, contact Bruce Clevenger at (419) 782-4771.

Specialists from the Department of Agricultural, Environmental, and Development Economics presenting topics include Barry Ward, assistant professor and Extension leader for production business management; Carl Zulauf, economics professor; Matt Roberts, associate professor and grain market analyst; Peggy Kirk Hall, director of the agriculture and rural law program; Stan Ernst, Extension program leader and marketing instructor; and Cameron Thraen, associate professor and dairy market specialist.

For more information on the Agricultural Outlook and Policy Program, contact Stan Ernst at (614) 292-6421, or ernst.1@osu.edu, or log on to http://aede.osu.edu/programs/outlook/ for meeting and topic information.

Ohio's Minimum Wage Rate Increasing January 1st

Ohio’s minimum wage rate will increase to $7.00 per hour on January 1, 2008. This reflects an increase of 15 cents per hour from 2007’s $6.85 per hour. While the Federal Minimum wage rate (currently $5.85 per hour), is still less than Ohio ‘s, it is scheduled to increase to $6.55 per hour on July 24, 2008.

Which rate should you use? If you are a farm business grossing under $255,000, your employees must be paid at least the Federal rate. Any size business is required to pay 14 and 15 year old workers at least the Federal minimum wage rate of $5.85/hour. If your business grosses more than $255,000 per year, then workers over age 15 would be paid at least Ohio ‘s $7.00 per hour rate.

When determining wage rates above the legal minimums, good workers must be paid competitively. In “Wages and Benefits for Farm Employees” published in the August 2007 Ag Manager, authors Ward and Zoller found that on the 122 farms returning surveys, part time employees averaged $9.01/hr and full time employees’ average wage was $11.53 per hour. These employees had worked an average of 8 and 11.5 years respectively. You can read about the survey here:

http://ohioagmanager.osu.edu/news/archive/2007/8-2007.php#wagesurvey

Minimum wage posters and fact sheets can be downloaded from the Department of Commerce web site at http://www.com.ohio.gov/laws/.

Annie's Project is Expanding across Ohio in 2008

The mission of Annie’s Project is to empower farm women to be better business partners through networks and by managing and organizing critical information. Annie’s Project was developed by Ruth Hambleton, an Extension educator in Illinois . She based the program on her mother, Annie Fleck’s life as a farm wife. She was a small-town girl who grew up to be a teacher, marry a farmer and lived with her in-laws. Annie was responsible for keeping the farm records, which were used to make tough management decisions in times of financial hardship. She was responsible for holding together the family as well as the business.

The program is an agriculture business course in risk management. It was held for the first time in 2003 and has been very successful throughout the Midwest . Since that time, over 2,000 farm women in nine states have completed the six week course in risk management.

Annie’s Project brings women together to learn the financial skills and critical information needed to manage the complicated business of running a farm. Specific topics include financial record keeping, understanding basic financial statements, financial management tools, goal setting and mission statement writing, commodity marketing basics, crop insurance, family communication, retirement planning, and learning about individual personality types and characteristics through the Real Colors program.

Annie’s Project was held in Wood and Delaware counties during the winter of 2007. The classes were filled to capacity with 47 women completing the course. Everyone had positive comments to share on the final evaluations. One participant from Delaware County commented, “This class has opened my eyes to a new side of farming and encouraged me to take a bigger role.” Another Delaware participant, continued, “ This class will enable me to help the farm be more profitable now that I understand how to take care of the paperwork.” A Wood county participant said, “I believe these classes made us realize the importance of taking care of insurance, liability and working on marketing besides just concentrating on planting & harvesting.”

Women play an important role in the family farm business and Annie’s Project will help them improve their management and communication skills. It will also provide the opportunity for women to network with other women in similar situations and learn from one another.

The class meets one evening a week for six consecutive weeks. Annie’s Project will be offered in six Ohio counties in the winter of 2008 as a result of funding by a North Central Risk Management Education Center Grant. The host counties for 2008 include: Ashland , Ashtabula , Auglaize, Defiance , Erie , and Wood.

The registration fee is $60 and class space is limited. For registration information contact the host county or project coordinators: Doris Herringshaw at 419-354-9050 and Julia Woodruff at 419-281-8242. You can also follow this link to download a brochure with specific county dates and registration information.

The registration flyer can be downloaded here:

http://ohioagmanager.osu.edu/resources/annieregflier.pdf

Farm Management Tech Tips

If you’re like me, you rely heavily on your PC, cellphone, and the internet to conduct your farm business and to research farm products. For this article, I thought I’d share with you some of the tech tips I use to make things a little easier on the farm. First, let me give you a disclaimer: I do not, nor does OSU Extension and the Ohio Ag Manager Team, endorse any of these products. These products are merely suggested for your convenience.

Ever have a great idea while in the tractor and no pen or paper handy? Or perhaps you’re in the middle of a field and need to email your seed sales representative. No problem any more with Jott (jott.com). Call the Jott number, it beeps, you leave a message. Jott sends the message to yourself, your seed rep, or whoever you choose. Jott sends your audio recording, transcribes your audio, and sends both in an email to your recipient. And whether that recipient is you or someone else, the email is received nearly instantly. I swear by it.

The first rule of good online password management is that you should have a unique password for each online account you have. I must have at least a dozen online accounts, and I have a different password for each account. That is, my password for my bank accounts is different from the password I use for my email, etc. So to help me manage my passwords I use the free online service Passlet (passlet.com). Passlet is a no-frills, free service (I like free), that allows you to store all of your passwords at one site. Other password managers I have used that have more features than Passlet include Clipperz (clipperz.com) and Passpack (passpack.com)

You’ve got the latest GPS mapping tools, and have created some really useful maps of your fields and saved those files on your computer. Also, you’ve got several years of yield records on your computer. If you haven’t already done so, now is the time to consider backing up those files so that you don’t lose all your data. Storing everything in back up device or hard disk is not always feasible (loss during a fire, some devices can get expensive, etc.). I backup my files online to avoid the problems associated with using a separate device for backup. I use Box (box.net) for my online storage needs. There is no special software to install, and users get one gigabyte of storage for free. Box.net is more of a file sharing service than a true backup service. For online automatic backup services you may want to look at Mozy (mozy.com) or Carbonite (carbonite.com). Please note, Mozy and Carbonite are fee-based backup services.

I rely on my computer for many different tasks, and try to keep it as ‘virus-free’ as ossible. To help with computer viruses, I use the AVG Free Edition for anti-virus software (free.grisoft.com). The program requires installation, but it is easy to install, simple to use and requires relatively little resources from your computer. It features automatic update functionality and real-time protection as files are opened and programs are run.

What if I told you that there is a free service that can ring all your phones at once? Also, there’s no longer any need to check cellphone messages and answering machine messages. Perhaps you missed a call on your cell when you were at home and wished your cell number would ring your home phone. No longer do you have to worry about any of this because Google GrandCentral has rolled out a service to unify all your telephone numbers (grandcentral.com). It takes the best features of a Blackberry, an iPhone, and a cellphone, and combines them in a web service. For now, you’ll have to reserve a number. When a number becomes available, you’ll receive an email from GrandCentral for you to officially register.


Creating On-Line Position Descriptions for Dairy Employees

We all know that it is easier to do a job well when you know what the employer’s expectations are for your position.  Below is a link to the Penn State Extension Dairy Alliance website that allows you to create a position description on-line for your dairy farm employees.  It will help you identify all the parts of a position description, whether it is in production or management.  This software allows you to spell out clearly each of the tasks the employee is responsible for, the expected work schedule, agreed upon pay and benefits, and chain of command for the farm operation.

To begin, click on “instructions” then follow the guidelines for creating a variety of dairy farm position descriptions.  When complete, you can print it out for editing, or to present to employees for your mutual benefit.

http://dairyalliance.psu.edu/hr/jobDescription/

2007 OSU Income Tax Schools Announced

Tax practitioners will have an opportunity to attend one of nine two-day workshops offered in November and December according to Dr. Warren Lee, Director of the OSU Income Tax Schools, The Ohio State University. The Ohio Income Tax Schools offer up to 16 hours of continuing education credit for Accountants, Enrolled Agents and Attorneys.

These workshops are intended for persons with income tax experience who prepare and file tax returns for individuals, small businesses and farmers. The instructors will focus on changes and problem areas related to preparation of federal and state returns. Participants will receive copies of the 2007 National Income Tax Workbook and the RIA 2008 Federal Tax Handbook.

The workshop locations and dates for 2007 are as follows: Ashland, November 14-15; Fremont, November 15-16; Columbus, November 19-20; Zanesville, November 27-28; Lima, November 29-30; Dayton, December 4-5; Kent, December 4-5; Chillicothe, December 6-7 and Brown Co. (Sardinia) December 11-12.

Workshop information, a downloadable registration form as well as on-line registration are available at the following website:

http://aede.osu.edu/programs/TaxSchool .

The tax schools are sponsored by Ohio State University Extension in cooperation with the Internal Revenue Service, the Ohio Department of Taxation and the Land Grant University Tax Education Foundation.  For additional information about the tax school, contact Warren Lee (614-292-6308 or lee.69@osu.edu ).

Now is the Time for Tax Planning

This time of year is a good time to do an income tax estimate. Cash basis tax payers have the opportunity to adjust income and expenses before December 31 st . For example, if you are experiencing a low income year, consider selling enough farm products to take advantage of the standard deduction (Single is $5350 and Married is $10,700) and personal exemptions ($3400) which represent a “zero tax bracket” opportunity. Also, if livestock (other than poultry) held for any length of time for draft, breeding, or dairy purposes are sold because of weather-related conditions, the gain realized on the sale does not have to be recognized if the proceeds are used to purchase replacement livestock within 2 years from the end of the tax year in which the sale takes place. The 2-year replacement period is extended to 4 years if the weather condition that caused the excess sales also caused an area to be eligible for assistance by the federal government.

For farmers receiving crop insurance or disaster payments, there is an exception to the general rule that payments must be reported in the year they are received. It allows a cash-basis farmer to postpone reporting a crop loss payment by 1 year. (It does not allow the taxpayer to accelerate reporting the payment if the payment is received the year after a loss.) To qualify for the exception, a taxpayer must use the cash method of accounting and must be able to show that, under the taxpayer’s normal business practice, the income from the crop would have been reported in a year following the year of the receipt of the payment.

Farmers with high income have a number of options to save tax dollars. If they have children (that work on the farm) wages paid to them is a farm expense and is not subject to social security if the child is less than age18. The single standard deduction is $5350, therefore the child will pay no federal income tax up to that amount. Wages above this amount would be subject to a lower tax bracket than the parent as well.

If you use the cash method of accounting to report your income and expenses, your deduction for prepaid farm supplies in the year you pay for them may be limited to 50% of your other deductible farm expenses the year (all Schedule F deductions except prepaid farm supplies). For livestock producers, you cannot deduct in the year paid the cost of feed your livestock will consume in a later year unless you meet all the following tests: 1.The payment is for the purchase of feed rather than a deposit. 2. The prepayment has a business purpose and is not merely for tax avoidance. 3. Deducting the prepayment does not result in a material distortion of your income. Cash rent for next year can not be a prepaid expense; advanced payments must be deducted in the year that they apply.

The Small Business and Work Opportunity Tax Act of 2007 (SBWOTA), enacted May 25, 2007, increased the annual I.R.C. § 179 expense limitation and phase-out amounts for tax years that begin in 2007, 2008, 2009, or 2010. The increased maximum annual expensing amount for the I.R.C. § 179 deduction is $125,000 for 2007 (subject to the phase-out threshold of $500,000).

Income averaging, using Schedule J, may also be an option for farmers with extra high income in 2007. It allows an elected portion of income for this tax year to be equally spread back over the previous three tax years. Therefore, allowing unused, lower tax brackets from previous years to be applied to 2007 income.

Here are useful tables for your income tax planning:

MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES

If Taxable Income Is:

Not over $15,650, the tax is 10% of the taxable income

Over $15,650 but not over $63,700, the tax is $1,565 plus 15% of the excess over $15,650

Over $63,700 but not over $128,500, the tax is $8,772.50 plus 25% of the excess over $63,700

Over $128,500 but not over $195,850, the tax is $24,972.50 plus 28% of the excess over $128,500

Over $195,850 but not over $349,700, the tax is $43,830.50 plus 33% of the excess over $195,850

Over $349,700, the tax is $94,601 plus 35% of the excess over $349,700

SINGLE INDIVIDUALS (OTHER THAN SURVIVING SPOUSES AND HEADS OF HOUSEHOLDS)

If Taxable Income Is:

Not over $7,825, the tax is 10% of the taxable income

Over $7,825 but not over $31,850, the tax is $782.50 plus 15% of the excess over $7,825

Over $31,850 but not over $77,100, the tax is $4,386.25 plus 25% of the excess over $31,850

Over $77,100 but not over $160,850, the tax is $15,698.75 plus 28% of the excess over $77,100

Over $160,850 but not over $349,700, the tax is $39,148.75 plus 33% of the excess over $160,850

Over $349,700, the tax is $101,469.25 plus 35% of the excess over $349,700

CAPITAL GAINS RATES (NONCORPORATE TAXPAYERS)

Category of Gain Tax Rate

Gain on collectibles, the tax rate is 28%

Unrecaptured Depreciation I.R.C. § 1250 gain, the tax rate is 25%

Net long-term capital gain, the tax rate is 15%

Reduced long-term capital gain rate if ordinary tax rate is 10% or 15%, the tax rate is 5%

Tax Advantaged Retirement Planning

In general, people do not put enough money aside for retirement.  Furthermore, with life expectancies increasing, the nest egg required to fund a retirement has also continued to grow.  Medical costs are increasing twice the rate of inflation and Social Security will not be enough for a comfortable retirement.  What should a person do?  At least fully fund Individual Retirement Accounts such as (IRAs), 401(k) or 403(b) plans, and if self-employed a SIMPLE IRA or Simplified Employee Pension (SEP).  Often, money put into these plans are tax deferred or deductible and, at times Uncle Sam even pays for some of it by an income tax credit.

For example, the Pension Protection Act of 2006 extended the IRC Secton 25b saver’s credit permanently.  The non-refundable credit is calculated as a percentage of the qualified contributions made to a retirement account. The credit ceiling for any individual is $1,000. The percentage is based on AGI and filing status, and the credit phases out as income increases. Contributions qualifying for the credit include those made to traditional IRAs, or Roth IRAs, plus elective deferrals to I.R.C. § 401(k) plans, I.R.C. § 403(b) annuities, I.R.C. § 457 governmental plans, SIMPLE IRAs, SARSEPs, and voluntary after-tax contributions to a qualified plan such as the federal Thrift Saving Plan.

Form 8880, Credit for Qualified Retirement Savings Contributions, is used to calculate the amount of the credit, which can be used to offset both income tax and alternative minimum tax. The income limits for each credit percentage increased for 2007 returns.

Saver’s Credit
Credit Rate    MFJ Income          Head of Household     Single/ MFS Income
50%         Up to $31,000            Up to $23,250               Up to $15,500
20%         $31,001–$34,000       $23,251–$25,500           $15,501–$17,000
10%         $34,001–$52,000       $25,501–$39,000           $17,001–$26,000


As an example, if a person that is married and files jointly with an adjusted gross income of $32,000, 20% of a $4000 IRA contribution would be eligible for a $800 tax credit. Even if a Saver’s Tax Credit is not available because of higher adjusted gross income levels, the tax deferred aspect of retirement plan savings is still a valuable consideration.

How much can a person contribute to the various plans:  See these charts:

RETIREMENT PLAN CONTRIBUTION LIMITS
Year                      IRAs              SIMPLE       401(k), 403(b) & SEP
2001                     $2,000             $6,500                 $10,500
2002                     $3,000             $7,000                 $11,000
2003                     $3,000             $8,000                 $12,000
2004                     $3,000             $9,000                 $13,000
2005                     $4,000             $10,000                $14,000
2006                     $4,000             $10,000                $15,000
2007                     $4,000             $10,500                $15,500
2008                     $5,000

AGE 50 CATCH-UP CONTRIBUTION LIMIT*
Tax Year    IRAs    SIMPLE Plans   All OtherPlans
2002      $ 500        $ 500                $1,000
2003        500         1,000                 2,000
2004        500         1,500                 3,000
2005        500         2,000                 4,000
2006      1,000        2,500                  5,000
2007      1,000        2,500                  5,000
2008      1,000         TBA                    TBA
*The limit is adjusted annually for inflation in $500 increments

Some farm families are experiencing high incomes and should consider this as an opportunity to save for retirement.  In the long run, it may pay a lot better than buying depreciable assets as a strategy to save tax dollars.

Identifying the Strengths, Weaknesses, Opportunities & Threats to Your Business

Have you ever taken the time to think about your business and consider what you do well, where your weaknesses are, what opportunities you might be able to capitalize on, and what factors threaten the survival of your business? Probably not. With the many tasks that need to be completed on a daily basis many farm managers have never taken the time to answer these questions by conducting a SWOT analysis. Identifying the Strengths, Weaknesses, Opportunities and Threats (SWOT) affecting your business can prove to be a valuable use of your time. Some farm managers who have taken the opportunity to critically examine their business and complete the SWOT analysis have made significant changes in their management to help ensure a continued viable business.

To learn more about what a SWOT analysis is and a form to assist you in completing the analysis, please go to http://ohioagmanager.osu.edu/resources/index.php and click on “Transition Farm Planning Factsheet Series.” The fact sheet “Conducting a SWOT Analysis of Your Agricultural Business” and the accompanying worksheet can be accessed from this site.

Should you have questions, please contact Chris Zoller ( zoller.1@osu.edu ) or Chris Bruynis ( bruynis.1@osu.edu )