Ag Connection

Your link to the Universities for ag extension and research information


Volume 3, Number 11
November 1997
This Month in Ag Connection
Agriculture Employer Reporting Responsibilities
Making Sense of that Computer Ad
Capital Gains Tax - Calendar & Calculator Required!
Taxpayer Relief Act of 1997

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Agriculture Employer Reporting Responsibilities

University Outreach and Extension guides with information for Ag Employers:

G00451: Liability of Farm Employers

G00700: Managing Farm Labor

G00857: Worker Protection: An Employer’s Guide to Worker Protection Standard Compliance

G01961: Agriculture and the Occupational Safety and Health Act (OSHA)

As operations expand, many farmers have to make decisions about hiring additional help. Adding an employee brings additional responsibilities, liabilities and legal requirements. Some regulations apply to all employers while others exempt small employers or various types of employment. A number of different government agencies also enforce laws and regulations making it difficult to make sure that all have been complied with. Sometimes it seems like when one employee is hired, two are needed — “one to do the work and one to do the paperwork!”

All employers are required to get both a federal Employer Identification Number (EIN) and a state Tax Identification Number. Employers must withhold state and federal income taxes along with social security and Medicare taxes from employee wages. Employees must complete IRS Form W-4 and W-4/MO so that withholding amounts can be determined. W-4/MO also meets the Federal New Hire Reporting requirements in Missouri. Annual employer state and federal tax returns are also required (IRS Form 943 and MO 941).

Other tax laws may or may not apply. Obtain MO Form 2699 from Employment Security (or your local Job Service Office) to determine state and federal unemployment tax requirements. Generally, farmers are subject to Federal Unemployment Tax (FUTA) only if they pay $20,000.00 wages or more in a calendar quarter or employ ten or more farm workers. Employers may also be required to advance IRS Earned Income Credit (EIC) if qualified employees want it.

The United States Immigration and Naturalization Service (INS) requires that INS Form I-9 be completed and kept for all employees.

A common misconception is that farm employers aren’t subject to the Occupational Safety and Health Act (OSHA). This is not true! All agriculture employers are responsible, but only those with ten or more employees are subject to OSHA inspections. OSHA has standards for labor camps, anhydrous ammonia, logging, slow moving vehicles and safety shields on equipment along with some requirements for safety training.

Worker compensation is not required of agriculture employers, but it should be considered from a liability standpoint — especially if there are five or more employees.

Other laws applying to employers include the minimum wage law and child labor laws. Minimum wage applies to employers with more than “500 man-days” of agriculture labor in any calendar quarter. A “man-day” is at least one hour in any day by an employee. Child labor laws apply to employees under age 16 and restrict the types of jobs they can do.

The Environmental Protection Agency (EPA) developed Worker Protection Standards (WPS) that require employers to protect employees from pesticide exposure. The standards apply to all employees that mix, load, apply or otherwise might be exposed to pesticides.

In addition to the above laws and regulations, other responsibilities exist. Civil rights legislation provides for equal opportunity and civil rights responsibilities. Employers also face legal liability for employees and liability for some employee actions. Any fringe benefits provided for family members may also have to be offered to employees.

See the quick check list reference of Requirements for Agriculture Employers. This list is intended as a handy reference to help make sure all requirements are met.

Author: Melvin Brees, Farm Management Specialist


“Megahertz” Doesn’t Refer to How Much it Hurts When the Computer Falls on You or . . . . . . . . . .

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Making Sense of that Computer Ad

Computers can assist you in many ways, but not without a climb on the learning curve (which for some of us may be a very steep climb).

Remember — a computer is just a tool. What you put into it will determine what you will get out.

The terms used in selling computers may sound like a foreign language. Look at computer ads and become familiar with these terms:

200 MHZ: MHZ is megahertz. It is a measure of how fast the computer operates. The higher the MHZ, the faster the computer processes.

Pentium: The “CPU” or Central Processing Unit, has a processor in it. These are called “Pentium”, Pentium Pro”, “Pentium II”, etc. for IBM compatible computers. These come in various speeds. Macintosh’s also have various speeds of processors. Comparisons of these can be found in various publications such as computer magazines. You should compare processors and determine what kind the computer you are considering has. The processor will affect what type of programs you can run and how efficiently and how fast they will run.

To understand memory, we need to define some terms:

A byte is 8 bits. It is capable of holding a single character.
A kilobyte (KB) is 1024 bytes.
A megabyte (MB) is 1,048,576 bytes.
A gigabyte (GB) is 1,073,741,824 bytes.

A diskette that can hold 1.44 megabytes can store 1.4 million characters or about 3000 pages of information. Graphics require a lot more storage than text.

32 MB RAM memory: The RAM memory is the random-access memory. All modern operating systems use RAM memory. When RAM memory fills up, some of the program and data is moved to the hard drive. This slows down the operation of programs. Most computers come with at least 16 MB of RAM memory. This is a minimal amount for many applications.

3.2 GB (gigabyte) hard drive capacity: This is the amount of storage capacity on the computer’s hard drive. This memory is used to store files as well as the programs you use for the applications you use. Many programs today take a lot of memory.

33.6 data/14.4 fax modem: The modem enables the computer to transmit data over phone lines. The numbers refer to the speed of the modem in the computer. The 33.6 data part is the fastest speed at which data is transferred when the computer is connected to the Internet. This will be slower if you are connected to a slower modem, or if your phone service limits the modem speed.

If you are going to access the Internet, get a fast modem (28.8 is minimal). The 14.4 fax is the speed at which faxes are sent. The speed is given in “baud” rate. This refers to the bits per second that are sent.

16X maximum, variable-speed CD-ROM: This refers to the speed of the CD-ROM on the computer. Since many programs and data collections (encyclopedias, USDA reports, guide sheet collections, etc.) come on a CD, it is a good idea to purchase a CD-ROM.

Monitor: Monitors are often sold separately. The type of work you will be doing with your computer will determine the quality of monitor you need to consider. Following are some terms you will see in regard to monitors:

VGA — Video Graphics Array: This monitor is limited to fewer colors and lower resolution than the SVGA monitors. Resolution refers to sharpness of the images and the size of the image on the screen.
SVGA — Super VGA: These offer greater resolution than VGA monitors. All SVGA monitors can support a palette of 16 million colors, but the number of colors that can be displayed simultaneously is limited by the amount of memory installed in a system.
Dot Pitch: The smaller the dot pitch, the sharper the image. The dot pitch for monitors for personal computers ranges from about 0.15 mm to 0.30 mm.

Built-in digital answering system with speakerphone: The computer can be connected to your telephone line and can be used as an answering machine and as a telephone.

Sound cards: A multi-media computer should come with a sound card, but it may not be the quality you want if you want high quality sound for music or multi-media presentations. Many CD-ROM’s include sound and there are sounds on the Internet you will want to hear.

So, what should you buy? This is a question only you can answer. It will depend on how you plan to use your computer. For the most flexibility, purchase the most powerful computer you can afford.

If you are going to use the Internet, purchase a computer with the fastest modem you can afford. RAM memory is important for efficient operation of the computer. Be sure you can expand the RAM memory.

Computer programs will give information on what amount of storage they need on the hard drive and what RAM memory they require. Consider carefully what programs you plan to use and dream a little on what you might plan to do in the future.

Information on the Internet on buying a computer:

Author: Don Day, Agriculture Engineering/Information Technology Specialist

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Capital Gains Tax - Calendar & Calculator Required!

The Taxpayer Relief Act of 1997 has added substantial complexity to the Code, while offering substantial tax reductions. A calendar and calculator will be extremely helpful in making the capital gain computations.

For 1997, an individual taxpayer could have tax rates on capital gains of 39.6%, 31%, 28%, 25%, 20%, 15%, and/or 10%; depending on what the gains resulted from, when the assets were sold, length of holding period, and whether the gains were attributable to depreciation deductions for real estate. For assets sold after July 28, 1997, the holding period to qualify for "long-term gain" has been increased from 12 months to 18 months. However, effective for sales made after May 6, 1997, the top capital gains tax rate for individual taxpayers was lowered from 28% to 20% (10% for taxpayers in the 15% regular tax bracket).

The difference of effective dates creates a new holding period, "mid-term". Capital assets sold after May 6 but before July 29 qualify for the new 20% maximum rate so long as they were held for more than a year. Assets sold after July 28 having a holding period of more than a year but less than 18 months will be taxed as "mid-term gain" at the 28% rate.

Other exceptions to the new rates. Gains from the sale of collectibles will continue to be taxed at the old maximum 28% rate. Long-term gain attributable to depreciation deductions for real estate will be recaptured at a 25% rate.

Don't hold your breath, but the Act also provides for additional reductions in the maximum tax rates on capital gains after the year 2000. Beginning in 2001, assets held for 5 years and sold by taxpayers in the 15% regular tax bracket will have a 8% capital gains tax rate. Beginning in 2006, the maximum capital gain tax rate will be reduced to 18% for higher tax bracket taxpayers.

Let us hope our elected leaders in Washington never "vow" to "simplify" the tax Code again!

Author: Parman R. Green, University Outreach and Extension Farm Business Management Specialist

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Taxpayer Relief Act of 1997

Home Office Deduction: The definition of principal place of business for the home office deduction has been expanded to include substantial administrative or management services. But don’t hold your breath on the implementation of this change. While the new rules will be beneficial for many farmers, the change in the definition does not go into effect until after December 31, 1998.

Self-Employed Health Insurance: The ‘97 Tax Act provides for the eventual 100% deduction for health insurance for self-employed taxpayers. However, the increased allowance is phased-in (40% deduction in 1997, 45% in 1998 and gradually increasing to 100% by 2007).

Income Averaging: This provision is available only for individuals engaged in the business of farming. The carry back period is 3 years. The dollar amount to average is electable. This provision will only be in effect for 3 tax years (years beginning after December 31, 1997 and before January 1, 2001).

Deferred Farm Sales: The ‘97 Tax Act provisions eliminate the difference in calculating tax liability on installment sales for regular income tax and the alternative minimum tax (AMT). This provision is retroactive to dispositions of farm property for tax years beginning after December 31, 1987.

“Roth” Individual Retirement Account (IRA): The Roth IRA is one of the new IRA “flavors”. While no deduction is allowed for Roth IRA contributions, all qualified distributions of the original contributions and account increase resulting from appreciation, interest, and/or dividends are tax-free. Roth IRAs will be available for tax years beginning after December 31, 1997.

Child Tax Credit: The ‘97 Tax Act provides a credit to taxpayers with children under the age of 17. For 1998 the credit is $400 per child and increases to $500 after 1998. There is a phase-out of the credit for taxpayers with income above certain amounts.

Hope Scholarship Credit: For each of the first two years of post secondary education a family can claim a maximum Hope credit of $1,500 per student per year. This credit is calculated at 100% of the first $1,000 of tuition and 50% of the next $1,000 of tuition. This credit is effective for tuition and related expenses paid after December 31, 1997 for an academic period beginning after that date.

Lifetime Learning Credit: This is a credit available for qualified educational expenses to acquire or improve job skills. This credit applies to expenses paid after June 30, 1998 for an academic period beginning after that date. The credit is 20% of the first $5,000 of qualified expenses through 2002, and the first $10,000 thereafter. The credit should be applicable to college juniors, seniors, graduate students, or working taxpayers pursuing job skill training.

Author: Parman R. Green, University Outreach and Extension Farm Business Management Specialist

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University ExtensionAg Connection - November 1997 -- Revised: September 30, 2002