As 2015 begins to draw to a close, it is time to begin considering everyone’s favorite time of year – tax season.
Doing your taxes is stressful enough, but it can be even more so when you own and operate a farm or agricultural endeavor. To navigate the tricky waters of taxes successfully requires farmers to put in a little advanced work prior to tax season – but the end result can be money saved and a little less stress.
Keep Accurate Records: One of the keys to tax savings is good record keeping.
“Farmers generally pay more taxes than required simply because they fail to record some expense or deduction,” states information from the University of Missouri Extension. “Forgetting $10 of expense will cost you about $2. Establishing an organized system for record keeping will prevent these tax leaks.”
Every farmer organizes differently, but a computerized spreadsheet (preferably saved to more than one device for backup) and a folder or envelope system to save and categorize receipts is a good baseline.
Proper record keeping also helps you “audit-proof” your farm and business.
According to an article by MissouriBusiness.net, “Audit-proofing your business means more than just saving receipts. Depending on the type of home-based business you operate, you may need to keep calendars, mileage and personal use logs.”
Accelerate Your Payments: If you have mortgage payments, medical bills, or state/property tax bills that are due in January, CIT Bank suggests making those payments prior to the New Year, if possible.
In some cases, this strategy might be able to help you make a current-year deduction on these payments – but check with a tax advisor or accountant first to verify.
Take Advantage of Tax Credits: Tax credits can be a wonderful opportunity to save some money come tax season. Congress continues to add new tax credit opportunities every year, so make sure to do your research to see if there is a credit that applies to you.
Some tax credit examples are making home or farm energy improvements, such as installing solar hot water heaters or insulation, education tax credits, and childcare or child day camp tax credits.
Consider Hiring a Tax Professional: Hiring a tax professional to assist you can often provide farmers and other small business owners great peace of mind. Filing your taxes can be intimidating, and having someone to help makes the task not so daunting.
Benefits of hiring a tax professional include reduced time constraints for the farm owner during tax season, the potential to find missed deductions or credits, and audit assistance. Tax preparation fees can also be deductible. Hiring a tax professional is largely a personal choice, and may not suit every taxpayer.
Plan Ahead: The real key to tax season success is planning ahead, and not waiting until the end of the year to frantically gather all your receipts and forms.
Organizing and keeping up on your records, researching tax credits, and being aware of potential deduction opportunities (such as the bake sale ingredients you might purchase to help out a local charity) can maximize your savings and help you and your farm to be more financially prepared for the future.
