As you’re working through harvest and watching everything come to fruition that you’ve planned for the entire year, there’s a different plan that needs to be getting started. I’m thinking of your farm’s tax plan.
Many farmers have found it helpful to work with a proactive tax advisor – one who calls during harvest with reminders to get the ball rolling and checks in to see when you’ll be done harvesting. They’re scheduling tax planning meetings with you, getting that on the calendar for when you think harvest will be complete.
Finding the right tax advisor for your operation is very important – you need to know you’re working with someone who will be forward-looking in helping you plan. It’s important to seek an advisor with at least several years of past experience – specifically working with complex farm and agricultural taxes.
Communication counts a lot here, too – it’s not just all about numbers! You want to know your advisor will be ready and responsive in answering your questions. They need to be helping you do planning in a time frame when it’s still meaningful.
Late November and early December tend to be the sweet spot for farm tax planning. That way, you can benefit the most from your planning and make smart decisions for your operation through the end of the year.
If your current tax advisor has been lacking in expertise, communication or timeliness, then you can probably bet that the future is going to look the same. Now is the time to find someone you can rely on to be proactive and efficient.
Here are a few items for your tax planning checklist – to ideally have already sent to your tax advisor – ahead of your planning meeting with them:
- Up to date farm books
- Updated, accurate income statement, to the date of the tax planning meeting
- List of all equipment bought and sold during the past year – including dates, amounts of purchases, sales and/or trade-ins
- Estimate of how much more income will be coming in before the end of the year
- Estimate of any additional expenses through the end of the year
During your meeting with your tax advisor, they need to go through the numbers with you. They should be able to explain different tax scenarios to you, based on how much more you’ll be bringing in as income, or spending through the end of the year. This can be very important when it comes to making decisions about pre-paying any expenses for the next crop year – as well as when and how much you decide to pre-pay.
Make it count
When it comes down to it, the end of December is simply too late for meaningful tax planning to happen – tax planning that actually helps with decision-making. The whole point of doing tax planning is to know where your farm is at before year-end, so you can make any changes to your planned expenses or income.
If you wait too long at the end of the year, you miss out on the opportunity to potentially make a difference in the outcome of your farm’s tax bill. Make sure you’re working with a tax advisor who helps you do timely planning – to give you the best opportunity to put your plans to work for you.
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.