Yes, it’s that special day of the year: the deadline for signing on the dotted line and sending off your paperwork to the IRS and your state department of revenue. If you’re like me, every year, you say “Next year, I’m going to be more organized, so that this isn’t such a pain in my rear.” Well, if that’s your New Tax Year resolution, here are some tips from Craig Idlebrook, writing for the Maine Organic Farmers and Gardeners Association. He spoke with three farm business specialists from University of Vermont Extension: Dennis Kauppila, St. Johnsbury; Bob Parsons, on campus; and Glenn Rogers, St. Albans. We include the tips here, but for the complete explanations, head over to the full article here.
1. Get your Hands on Publication 225
Publication 225 can be ordered or downloaded at www.irs.gov.
2. Find a Great Accountant – Especially one who specialized in farming tax code.
But keep your own records to reduce the cost – you don’t need an accountant to keep your books.
3. Predict the Future
You can run the numbers on your taxes at different point throughout the year to tell you if problems might be on the horizon so that you can make necessary changes.
4. Don’t Cut off Your Nose to Spite the Taxman
Don’t go spending money just to save taxes on it.
5. Avoid the “H” Word
H, as in “hobby.” When you’re a business you get more opportunities to declare your expenses. Publication 225 lists nine criteria for establishing a farm as a business. The farming activity is presumed to be carried on for profit if it produced a profit in three of the last five years, including the current year.
6. Put Your Home to Work for You
Your farm’s electricity, your vehicle, and that home office you have are all expenses. The full article has other great info for this tip.
7. Make Your New Farm Building Special
It’s all about the depreciation and how to take advantage of it.
8. Good Ol’ Section 179
While we’re on the topic of depreciation, Section 179 says that farmers who gross under $400,000 a year and buy farm equipment can depreciate up to $108,000 of the cost of that equipment on their taxes in the first year. Some limitations apply, so check Publication 225.
9. Actually Pay Your Kids
Check out all the reasons and benefits in the full article.
10. Oops, I Forgot To Save for My Retirement
If you don’t pay Social Security, the government thinks you’re going to handle your own retirement and they don’t have to look after you. If you’re not paying into your own IRA or other retirement fun, there are options for ways to pay into social security even if you’re not making a lot of money so check them out.