Tax Time is Here Again

Teresa Olson
By Teresa Olson December 27, 2017 10:16

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Just like the holidays, tax time comes around once a year.  For many, this deadline can create anxiety and frustration, so the key is preparation.  Here is some basic information that might make your life easier:

  • Two Important Points to get You Started.  1. Get your hands on IRS Publication 225 (Tax Guide for Farmers), and 2. Find a great accountant (in particular, one who specializes in farming tax code).
  • Predict the Future.  Farmers can improve their tax returns through strategic buying and selling.  Shawn Williamson, CPA (of Fick, Eggemeyer, and Williamson in St Louis, MO) says if you’ve had a great year you might accelerate expenses and defer revenue.  If you’re losing money, accelerate revenue and defer expenses.  Don’t sit on December checks, though.  That check in your hand is revenue whether you cash it or not.  Williamson also cautions that losses over $100,000 are prone to invite IRS audits.
  • Don’t Cut off Your Nose to Spite the Taxman.  It’s easy to go overboard trying to avoid paying taxes, and far too many farmers have bought equipment just so they can have a deduction.  Equipment should only be purchased because you need it.
  • Take Advantage of Your Home.  Remember to separate farm electricity, insurance and phone expenses from your home expenses.  An office in your home is also deductible, but make sure it’s used only for your business as the IRS watches closely for abuses.  Read more on this:  IRS Publication 587, and page 23 of the Farmer’s Tax Guide.
  • Actually Pay Your Kids.  Children have been a farmers free labor force for what seems an eternity, but you might want to reconsider this.  Their wages are deductible, and their clothes may be as well.  Consider putting these wages directly  into an IRA – you’ve given them a start on their retirement and kept them from spending this money on less important things.
  • Your Retirement.  Even though you may not have enough taxable earnings to qualify paying into Social Security, consider paying into it anyway.  If you don’t, the IRS may assume you’re going to be handling your own retirement.  You’ll need 40 credits by the time you’re 62-65 to be eligible for benefits.

Some essential information to have in your file when getting prepared:

  • Photo ID drivers license, military, or student ID.  Social Security Card.  Your checkbook, a voided check or the account information.  Any documents that support name changes.
  • W2, 1099, 1099-INT, 1099-R, 1099-G, 1099-DIV, 1099-B, W2-G, 1099-PATR.
  • Log books to support your mileage.  Details to support equipment you’ve sold/traded/brought in or out of service (i.e., dates, description, mileage, sales price).

The best tax planning strategy for farmers is to plan all year long, so consult your accountant before making your decisions.  His expertise will no doubt be beneficial as you conduct business another year, and it should ease your concerns at tax time.

Terry Olson, Titan Outlet Store Team

 

References:

https://www.agriculture.com/podcast/successful-farming-radio-podcast/prepping-for-tax-time?utm_source=ag-newsletter&utm_medium=email&utm_campaign=todaysnews_121817&did=202230

https://www.agriculture.com/farm-management/finances-accounting/year-end-timing-decisions

http://www.mofga.org/Publications/MaineOrganicFarmerGardener/Spring 2007/TaxTipsforFarmers/tabid/707/Default.aspx

http://www.tattooedhomestead.com/2015/03/tax-prep-checklist-for-farmers-and-homesteaders.html

 

Teresa Olson
By Teresa Olson December 27, 2017 10:16
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2 Comments

  1. DIAMOND L FARMS December 28, 12:49

    GOOD INFO THANK YOU VERY MUCH

    Reply to this comment
    • Teresa Olson Author December 29, 09:36

      Thanks for reading our newsletter. We try to provide information that is both interesting and useful. Happy New Year!
      -Terry Olson, Titan Outlet Store Team

      Reply to this comment
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