IRS Extends Tax Relief to Farmers and Ranchers

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The Internal Revenue Service (IRS) has announced that it’s extending tax relief for farmers and ranchers who had to sell livestock due to drought, giving them more time to replace the livestock and defer tax on any gains from the forced sales.

The 12-month extension is being granted to eligible farmers and ranchers in 49 states, the District of Columbia, and two U.S. Territories, as listed in a Sept. 27 notice (pdf).

“The one-year extension, announced in the notice, gives eligible farmers and ranchers until the end of their first tax year after the first drought-free year to replace the sold livestock,” the IRS said in a statement.

For the purposes of the extension, the “first drought-free year” is a 12-month period ending on August 31 in the last year of the taxpayer’s so-called “4-year replacement period” that does not include any weeks with exceptional, extreme, or severe drought conditions reported in the region.

The 4-year replacement period refers to a situation in which a taxpayer was forced to sell property (like livestock) due to factors like drought or flood, and they have four years from the first taxable year in which they realize gain from the sale to replace the property without recognizing the gain for tax purposes.

A farmer harvests soybeans in a field along the Mississippi River near Wyatt, MO., on Oct. 17, 2022. Scott Olson/Getty Images

Eligibility Details

The IRS said that the eligible relief covers capital gains from draft, dairy, or breeding livestock sales directly related to drought. Other livestock sales (for example, for slaughter or sporting purposes) and poultry sales are not eligible.

Generally, the relief stipulates that eligible farmers and ranchers must replace livestock within four years instead of the usual two, with the IRS having the power to extend this period further in case of continued drought.

The extension applies to regions with exceptional, extreme, or severe drought conditions between Sept. 1, 2022, and Aug. 31, 2023, as determined by the National Drought Mitigation Center.

This extension benefits farmers and ranchers whose original replacement deadline was Dec. 31, 2023, mainly affecting drought sales from 2019 and earlier.

Further specific guidance can be found in Notice 2006-82.

Beef ranchers survey their herd of cattle in Quemado, Texas on June 13, 2023. Brandon Bell/Getty Images

Relief for Hurricane Victims

In addition to relief for farmers and ranchers related to droughts, the IRS is also providing tax relief to anyone affected by disaster declarations issued by the Federal Emergency Management Agency (FEMA).

The IRS recently announced a tax relief package for individuals and businesses in Maine and Massachusetts that are grappling with the aftermath of Hurricane Lee.

Taxpayers residing or operating businesses in all 16 counties in Maine and all 14 counties in Massachusetts now have until Feb. 15, 2024, to file various federal individual and business tax returns and make tax payments, the IRS said in a Sept. 25 statement.

The tax relief measures postpone various tax filing and payment deadlines that occur between Sept. 15 and Feb. 15 next year.

Deadlines Postponed

Those who were affected by Hurricane Lee in Maine and Massachusetts who had a valid extension to file their 2022 returns (initially due to run out on Oct. 16) will now have until Feb. 15, 2024, to file their returns.

This extension applies to filing only and not to tax payments, as tax payments related to these 2022 returns were originally due on April 18 this year.

Quarterly estimated income tax payments normally due on Sept. 15, 2023, and Jan. 16, 2024, have been extended by the IRS’s action to Feb. 15, 2024.

Also, quarterly payroll and excise tax returns, typically due on Oct. 31, 2023, and Jan. 31, 2024, have also been granted an extension, with the new deadline set for Feb. 15, 2024.

Several business entities will benefit from this relief, including calendar-year partnerships and S corporations whose 2022 extensions ran out on Sept. 15, as well as calendar-year corporations whose 2022 extensions run out on Oct. 16.

Additionally, calendar-year tax-exempt organizations whose extensions run out on Nov. 15, will also have until Feb. 15, 2024, to file their returns.

Penalties for the failure to make payroll and excise tax deposits due on or after Sept. 15 and before Oct. 2 will be abated, provided the deposits are made by Oct. 2.

Affected taxpayers located within the disaster area will receive automatic filing and penalty relief and are not required to contact the IRS separately.

In unique circumstances where an affected taxpayer does not have an IRS address of record located in the disaster area, they could receive late filing or late payment penalty notices from the IRS. In such cases, taxpayers should call the number on the notice to have the penalty abated.

Taxpayers living outside the disaster area but who have records necessary to meet a deadline during the postponement period located in the affected area are also eligible for relief. Such individuals should contact the IRS directly for clarification regarding their filing circumstances, the tax agency said.