USDA entering partnership with IRS

Thursday, January 14, 2010

INDIANAPOLIS -- USDA Farm Service Agency in Indiana Executive Director Julia Wickard announced Wednesday that USDA will be partnering with the Internal Revenue Service (IRS) to reduce fraud in farm programs and streamline payment limits for family farmers.

"This new USDA-IRS partnership is intended to help Hoosier farmers meet the requirements in the 2008 Farm Bill," Wickard said. "USDA wants to ensure that the producers who depend upon the safety net of USDA programs will have access to them in the future."

As part of today's announcements, USDA has finalized a Memorandum of Understanding with the IRS to establish an electronic information exchange process for verifying compliance with the adjusted gross income provisions for programs administered by USDA's FSA and Natural Resources Conservation Service (NRCS).

This agreement will ensure that payments are not issued to producers whose adjusted gross income (AGI) exceeds certain limits. The limits set in the 2008 Farm Bill are $500,000 nonfarm average AGI for commodity and disaster programs; $750,000 farm average AGI for direct payments; and $1 million nonfarm average AGI for conservation programs.

The electronic process that USDA developed with IRS reviews data from tax returns, performs a series of calculations and compares these values to the AGI limitations from the 2008 Farm Bill.

FSA and NRCS will receive a record that indicates whether or not the program participant meets the income limits.

IRS requires written consent from an individual or legal entity to provide USDA verification of the average AGI. This will be accomplished by completion of forms CCC-927, Consent to Disclosure of Tax Information -- Individual; or if a legal entity, CCC-928, Consent to Disclosure of Tax Information -- Legal Entity.

No actual tax data will be included in the report that IRS sends to USDA.

As part of the review and evaluation process, participants whose AGI may exceed the limits will be offered an opportunity to provide third party verification or other information to validate their income.

Beginning with the 2010 program year, USDA has amended the rules that govern the requirements to be "actively engaged" in farming. These rules apply to eligibility for payments under the Direct and Counter-cyclical Program (DCP) or Average Crop Revenue Election (ACRE) program administered by FSA.

USDA has implemented the following change to permit certain operations, most often family-run operations to meet "actively engaged" in farming requirements, under less restrictive rules.

Every stockholder or member of a legal entity, such as a corporation, does not have to contribute labor or management if both of the following apply:

* At least half of the interest in the legal entity is held by stockholders or members who are providing active personal labor or active personal management that altogether qualifies as a significant contribution to the farming operation, and

* The total direct payments received, both directly and indirectly, by the legal entity and each of the members does not exceed $40,000.

Wickard also reminded producers the 2010 DCP/ACRE signup is underway and will end June 1. Contact a local FSA office for more details.

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