MFP Payments and Tax Planning: Timing is Everything

Paul Neiffer MFP
Farm Journal tax expert Paul Neiffer says the only way to defer the MFP payment is to wait and process your claim with FSA after December 31. ( Farm Journal )

USDA has, at long last, announced details of a second tranche of Market Facilitation Program (MFP) payments. But growers may want to talk with their tax specialist before rushing to the Farm Service Agency (FSA) office according to Farm Journal tax expert Paul Neiffer.

“The payment is not deferrable,” said Neiffer. “So, if someone needs to defer the payment for tax purposes, they can go down to the FSA office and simply sign up for it at the end of the year, so they get their payment in 2019. That defers a pretty good size payment.”

Farm Journal Washington correspondent Jim Wiesemeyer said payment rates for each farm good included in latest round of the program were unchanged from the first round of direct aid, announced in August. He also said there is a separate payment limit of $125,000 per person for crops and for livestock, growers with less than $900,000 adjusted gross income are eligible. Neiffer said all of this needs to be taken in account when doing tax planning.

“This is not crop insurance,” said Neiffer. “Even if it was crop insurance that we could normally defer, this is based on price and has nothing to do with yield. Any price component of any crop insurance or a payment like this, you can never defer unless they come out with a rule saying they can.”

Neiffer said the only way to defer the payment is to wait and process your claim with FSA after December 31. Producers who have already enrolled in the first round of MFP payments are automatically enrolled in the second round.

USDA already outlined the timeline for sign-up and providing production data. Producers must complete an application by January 15, 2019, but those who sign-up have until May 1, 2019 to certify their 2018 production.