Tax Tips for Loggers
Get a Second Opinion From Mark
By Jim Burns
In my last article, I tried to explain why you need a “good accountant.” Now, let me introduce you to one, Mr. Mark Ricci, Certified Public Accountant. Mark is a senior tax specialist for AgStar Financial Services located in their Rice Lake, Wisconsin office.
Without boring you with all of his academic training and experience, let me just vouch for the fact that Mark can add 2 plus 2 and always comes up with 4, no matter how much you may want a different answer. This type of attitude would probably disqualify him for a job with Congress, but he is definitely someone you can trust to do your tax return.
AgStar itself is a unique organization dedicated to providing loans and other financial services throughout our region (see their ad). Of prime interest to our readers, is the fact that they actively seek clients in the timber business. In addition to loaning money to loggers, they also provide a complete lineup of accounting, tax preparation and financial management professionals like Mark, who can help make your business more profitable.
The following then, is the result of an interview I had with Mark recently regarding taxes and other subjects of interest to loggers.
Burns: AgStar loans money, so it sounds like a bank, but it also provides all kinds of other services such as your specialty of income tax preparation. Is your organization a bank or something else?
Ricci: AgStar is a cooperative owned by our client-stockholders. We provide a broad range of financial services including income tax preparation, accounting and payroll services to loggers, landowners, agricultural and rural clients.
Burns: Let’s say a logger did not want to borrow any money, but just wanted you to prepare the income tax return for the business. Is this possible, or do they have to be a loan client?
Ricci: There is no requirement to have loans or leases with AgStar for us to prepare your taxes. Many of our current clients come to us for the sole purpose of having their income taxes prepared.
Burns: Okay, so as a cooperative, how do I get to be a stockholder, and secondly; do I need to be a stockholder to get my taxes done?
Ricci: Generally speaking, to become an AgStar stockholder, one must purchase a loan, insurance product, or related service from us, but you do not need to be a stockholder to have us prepare your taxes.
Burns: As senior tax consultant, you must spend a lot of time researching the Internal Revenue Code. Do you do this all by yourself or do you have other accountants assist you?
Ricci: AgStar tax consultants work as a team. Research done by one team member is usually shared with the entire team.
Burns: How many tax accountants work for AgStar?
Ricci: Approximately 15 - 20 full time plus seasonal and casual staff.
Burns: Is capital gain tax treatment for timber income covered in the Internal Revenue Code, and if it is, is it legal for loggers and landowners to use?
Ricci: Capital gain tax treatment for timber income is governed by Internal Revenue Code Section 631. Loggers and landowners qualify for capital gain treatment as long as they meet the requirements.
Burns: Why would anyone want to report their income as capital gain?
Ricci: To save taxes. Capital gain income generally saves two types of tax, self-employment tax and income tax.
Burns: If any of your clients sell timber, outright or use it as part of their trade or business, do you report it as capital gain on their tax return?
Ricci: In most situations, yes, you have to look at the individual taxpayer’s situation to determine what is best and/or what may be the correct way to report such income. Most loggers who qualify under Section 631(a) elect to report it as capital gain income.
Burns: Okay, so capital gain tax treatment is legal, it saves a lot of money on taxes and most loggers that qualify elect to use it to report their timber income. I have been trying to tell my readers these facts for years, but the message usually gets sabotaged when they ask their accountant to use it. Typically they receive a response in some variation of “this is not legal and we will not do it.” Can you explain this type of attitude, and secondly, why are you different?
Ricci: AgStar has a firm policy against expressing opinions regarding other financial service providers, so in that regard, and out of professional courtesy, I will not comment about what other accountants do or do not do. What I will say is that when our clients bring us tax suggestions, we fully research the law to determine if it will be beneficial to the client before we comment to them or implement a change. We welcome input from our clients at all times.
Burns: If a logger or landowner receives a negative response from their tax preparer about using capital gain, can they contact you to get a second opinion?
Ricci: Yes, of course I will be happy to talk with them. For contact information they can refer to our advertisement in the Logger’s Shopper or call me direct at: 715/236-5260.
Burns: Readers of this publication are located over a large geographic area. If a logger from outside your normal working radius contacts you, can you help them find a tax preparer closer to their home?
Ricci: Sure, I would do my best to help them. If they already have a tax preparer, we would first try to explain the capital gain tax treatment for timber to that accountant. In some cases, if they need a tax preparer we may be able to do the work ourselves. In any event, we will offer suggestions regarding other options.
Burns: Thank you Mark for taking the time to answer these questions. Your responses will be of great value to our readers who desperately want to save money on their taxes.
Mark Ricci, Sr. Tax Consultant with AgStar, can be reached at 866-577-1831.