by Austin Weaver

By now, farmers in New York should be familiar with the new overtime pay requirements and the required information to claim the associated tax credit for the 2024 tax year.

The time to apply for an advance of the credit is now. The New York State Department of Agriculture & Markets has opened the application period, with a Sept. 30 deadline to submit an advance payment claim.

The eligible advance period remains Jan. 1 to July 31, but the application process is opening early to allow farms to begin entering data and apply early if they choose.

The department has simplified the process by dropping the requirement to supply actual payroll documentation or records, along with the primary zip code where the work was performed. Employers should continue to maintain all necessary records and documentation should there be any questions about the information submitted.

Farmers with employees, here’s what you need to know:

Once a producer submits their tax credit claim, they will receive a certificate of the advanced payment that they can use to request their share of the advance payment from the New York State Department of Tax and Finance by Nov. 1.

Eligible producers will need to maintain the following information:

More helpful tips

When reporting overtime hours, remember to break out the eligible overtime from the noneligible overtime. This way, payroll reporting can complement the information that the income tax preparer will need to accurately apply for the credit and advanced payment.

To that end, you should inform your payroll processor to set up a separate earnings code that notes the eligible overtime per employee.

Anytime an employee gets a pay raise, communicate that information to your payroll processor. If possible, it may be a good idea to keep raise calendar cycles consistent to make it easier for the income tax preparer to find when the time comes to receive the credit.

This is important since every pay increase will increase the overtime rate, which increases the amount of the tax credit. It may be prudent for you to track all pay rate increases for the year to complement payroll reports when it’s time to apply for the advance payment or tax credit.

Potential pitfalls

Farm employers with multiple entities need to be aware that not all their entities will qualify for the credit. The entity must earn two-thirds of its gross revenue from farming. Entities that primarily engage in activities related to farming (such as custom harvesting, animal care or processing) but do not report their income on a Schedule F would not have farm income and thus not qualify.

Farm employers that have management holding companies that run payroll for multiple eligible farming entities also run the risk of not being able to claim the credit. For example, perhaps there are two farming LLCs that have employees owned by the same individuals who also own a third LLC that manages the LLCs and where payroll is processed from. The problem there is that the management company would typically not have two-thirds gross farm income.

Farm employers who operate a sole proprietorship may have their own outside income, or a spouse with significant outside income. It is critical to not assume that just because a farm is being operated that it automatically qualifies for the credit. The two-thirds gross income test must be met.

Weaver is a tax specialist with Farm Credit East.

Source: Farm Credit East