OT..F farm exept paperwork

will start farming 40 acres next year. What do I have to do come tax time? I obviously wont make any money...do I just show up to my accountant with my reciepts? Can someone give a little direction here>? THANKS!!

As far as income tax goes if your accountant is familiar with agricultural tax returns then I would say all you got to do is just show up with receipts. All farm income is reported on a Scedule F. It really isn't that bad for small time guys like me and you I have attached a link to the IRS guide on farmers taxes. It actually can be sorta helpful and maybe a good idea to read through even if you accountant is gonna handle everything.

As far buying equipment, parts, seed, chemicals, etc. tax exempt that maybe a state by state thing. In SC all you have to do is fill out a form stating it is for ag use with each vendor that you purchase from and you can buy your stuff tax exempt.

I know of some people that fill out a Scedule F even though all they do is drive around on a tractor and plant food plots. It is my understanding that if they are ever audited the IRS will want to see some evidence that they are actually trying to run a business (make money) not just create a tax shelter. Not in anyway saying that is what you are doing, but it may be good to show a profit every once in a while. I understand that on small acres like ours if you take all of the deductions the big boys do that can be hard, but I try to be rational and fair to myself and the goverment about it. With these prices you might be surprised that you can make a little (not a lot) of money. Best of luck to you!!
Farmers Tax Guide

use an accountant that is familure with farm taxes. Each state is different you may qualify for reduced property taxes. Your state farm bureau might have some insight there.

Use one of the spreadsheet or Word templates and create a "2012 Farm Expense ledger.
Group your expenses and income into subcategories. Example, "Consumables" (fuel, oil, seed, fertilizer, pesticides.
Then a "repair" group, Then a group for equipment that will be depreceated.
And last an "Income" group.
Keep a shortcut to that ledger on your desktop. Open it and make entries everytime you have a receipt. Then toss the receipts in a envelope. You now have made your accountant's job 1/4 as complicated.

Farm expenses are in 3 broad catigories:

Yearly - seed, fuel, fert, small repairs, other things you buy & use in a year.

Mid term: Machinery, and other stuff that you use for about 5-7 years, these get deducted over a 5 or so year period, 1/5 each year for the next 5 years. There may be complicated ways to deduct the entire cost in one year, or file amended taxes for past years and reduce your taxes from past years, etc.

Long term: Buildings, tile, and other things that probably have a 20 year lifespan, get deducted over a 20 year period, 1/20th each year. Again, there are complicated 'quick' deductions you can sometimes use.

You get to claim income on the year you sell a crop, not always the year you grow the crop.

The biggest part of farming is working within these rules to plan your taxes, you can perhaps buy fertilizer and seed in November for the following year, and sell your crop in February so as to have lower income or higher deductions to match up to good years or poor years and keep from spiking your income into a different tax bracket.

Sitting down with a good farm tax preparr before year end and spending $200 on his time to plan out a good business straitigy could be money well spent. Yes, it's a game of playing with tax income and expenses, some will view it as loopholes, but it is how the govt has set up the system, you either play the game or you pay extra taxes....

Bringing in your reciepts in Jan works, but you missed out on the planning to help yourself. Good plan if you understand the tax stuff already, but you could miss a lot if you don't. Be aware if you make money farming, you can owe those taxes on March 1st, not the normal tax date for paycheck folks.

--->Paul

He should show up at his accountant with records, including totals, not just receipts. At $100 per hour, the bookkeeping should already be done. Record keeping is a year-long procedure- can"t wait til the end. Farmer needs to be aware of what is going on throughout the year.

If you claim a farm truck, here in Iowa, it must be a 3/4 ton. Cant use 1/2 ton and deduct it.

Quicken is your friend. Categorize expenses, print one page report for accountant.

You are correct, carry the ledger book. I take the record keeping part for granted, probably because I do my own taxes, the record keeping part is a given when you do that. I'll bet there are alot of accountants that wish everyone would do there own return just once, I'll bet it would make their life alot easier!

You are correct, I mispoke, carry the ledger book. I take the record keeping part for granted, probably because I do my own taxes, the record keeping part is a given when you do that. I'll bet there are alot of accountants that wish everyone would do there own return just once, I'll bet it would make their life alot easier!

The time to talk to the accountant is now. That way he can make sure you will be keeping track of the things he needs when it comes to tax time. Any expense now will be more than offset by the time saved we he does the taxes.

I GOT MOST ALL MY QUESTIONS ANSWERED! That link post was especially helpful.

I purchased this laptop just to have on had for records and research. I already bought my main tractor (I was going to buy it anyway) and I have almost everything else. I just wont be doing any official "farming" till this spring 2012...In fact Im going to town tomorrow to get my DBA...