Having Your Documents in a Row
Providing your tax professional with all documents and deductions can make tax season easier
For most farmers, just the word taxes is enough to make them cringe. The thought of all the paperwork and record organization is no one’s idea of fun. Many farmers have their taxes prepared by an accountant – this is generally a relatively inexpensive way to make sure you get the tax return you deserve, and it also takes a great deal of stress out of tax season. Should you choose to go this route, however, there’s still a bit of work on your end to get those documents in order.
Preparation and Organization of Documents: Before you go to see your tax professional, you’ll want to have all your documents as organized as possible. This doesn’t just mean W2s. “W2s, 1099s, Social Security numbers, interest and other income statements and bank account numbers for direct deposit of your refund, are the basics for 1040 EZ and 1040A filers,” said Laura Hendrix, an assistant professor of family and consumer economics for the University of Arkansas System Division of Agriculture. “For those with dependents and/or itemized deductions, you’ll need supporting documents for those items to complete form 1040 and other related forms such as Schedule A for itemized deductions.”
Brent DeRossett, CPA, MBA with Advocate CPAs and Advisors in Branson and Ozark, Mo., offers several preparation tips for farmers that are getting their documents in order.
“It is best to keep sales of breeding or dairy livestock (sale of asset) separate from the sale of younger and/or non-breeding livestock (farm income),” he suggested. “For other types of revenue, also maintain and report separate categories, as the tax rules may vary. Examples include sale of standing timber, sale of mined rock, rental, program payments, etc.”
Another preparation tip is to “utilize year-end “organizer” booklets that many tax accountants can provide, and provide clear & complete numbers and answers.” Finally, Brent encourages producers to “make note of any questions or special/changing circumstances in the past year, or expected in the next year” before heading to the accountant’s office.
Be Mindful of Deductions: Farmers can write off many expenses on their taxes. Mileage, fuel and equipment, conservation expenses, feed and pre-paid farm supplies are all items that qualify. Bigger purchases count too. “When acquiring or inheriting farm property and assets, obtain timely professional guidance for initial accounting to optimize future depreciation deductions,” advised DeRossett Also, something to consider when it comes to deductions is the “flow” of farm income. “Planning the timing of occasional “big income” events can have significant implications (on deductions),” said Brent. He suggests a planning session in advance of these situations with your tax professional, if it’s practical.
DeRossett suggests that producers “pay your kids.” In 2018, a child can have earned income up to $12,000 at zero income tax, he explained. Farmers should consult their tax professional in regard to a potential self-employment tax.
Start Planning for Next Year: Preparation for tax season doesn’t have to happen the week you plan your appointment with your tax professional; in fact, the whole ordeal will be much less demanding if you do a bit of work in advance spread throughout the year.http://www.ozarksfn.com/2018/01/29/having-your-documents-in-a-row/Farm Helpdeductions,documents,farmers,Klaire Howerton,tax season,taxesProviding your tax professional with all documents and deductions can make tax season easier For most farmers, just the word taxes is enough to make them cringe. The thought of all the paperwork and record organization is no one’s idea of fun. Many farmers have their taxes prepared by an...Klaire HowertonKlaire Howertonklairebruce@gmail.comAuthorOzarks Farm & Neighbor Newspaper