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7 year-end tax planning tips for farmers
In the season of spending time with family and friends, year-end tax planning probably isn’t high on your holiday to-do list (perhaps it’s not even on the list yet!). While tax planning might not be the most exciting thing to do during the holiday season, it’s important to start tax planning as the year ends. Starting your taxes early gives you enough time to make sure they’re done correctly – and to make sure you are getting all the credits and deductions you can!
- Meet with your financial advisors and farm team: Spending a few hours planning now could save you many hours of frustration (and thousands of dollars!) later. Meet with your advisors and farm team to make a plan for completing your taxes, including deciding who is gathering what information, filling out which forms, and more.
- Add up all your deductible expenses: There are many farm-related expenses you can deduct from your taxes, including farm equipment, breeding fees, fertilizer, fuel, chemicals, insurance, professional and consulting services, loan interest and more. Consult with a tax expert to ensure you are deducting all the expenses you can.
- Total employee wages: If you have paid help on your farm, you can deduct the wages you paid for both full and part-time employees from your taxes. Don’t forget that you must withhold Social Security, Medicare, and income taxes from any wages you pay. This is also a good time to make sure you have a plan for creating and distributing their W-2 tax forms.
- Don’t forget insurance payments: If you received any insurance assistance this year for damaged crops, remember that insurance payments generally need to be recorded as income on your taxes in the year you receive them. You may be able to postpone reporting some payments on this year’s taxes: more information is available on the IRS website.
- Look for opportunities for tax credits: Tax credits are a great way to save money, but many farmers miss valuable opportunities. For example, did you know you could get a tax credit for the purchase of fuel used on your farm? Working with a tax advisor can help you make sure you take full advantage of tax credits.
- Total up your charitable gifts for the year: Track down receipts from any cash donations you may have made to charitable organizations. Note that if you have made a gift of grain to an organization, you generally cannot deduct that gift, but you do not have to pay income tax on that grain.
- Start the new year with balanced books: Digging out paper receipts from unlabeled file folders, having to open 12 different spreadsheets to figure out expenses, having your financial data spread across several computers: does this sound like your farm? Keeping well-organized, easy to access financial records for your farm makes tax planning easier, saves you money, ensures the security of your farm data, and means a lot fewer headaches!
Secure, cloud-based records are key for a financially healthy farm. Secure records make it easier for an advisor to evaluate your operation and find tax credits, make it easier for you to evaluate your farm’s financial health, and protect your farm from unexpected disasters.
A SaaS company like AgCompass that specializes in hosting accounting software is the most secure way to keep your farm’s records safe while also providing anywhere access for you and your accountant. Learn more about AgCompass.
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