Farming has tax rules that apply to no other business. There is a different estimated tax deadline, a way to spread a good year over past years, a separate payroll return for farmworkers, and relief when weather forces livestock sales. We prepare farm returns and keep farm books with those rules in mind.
The points where tax and accounting rules come into play are numbered.
Numbered points are explained below.
At: Grow or raise
Farm wages go on a different payroll return from other businesses’ wages. Employers who pay wages to farmworkers report them on Form 943, an annual return for agricultural employers.
We record farmworker wages separately in the books so the figures for Form 943 are easy to check.
At: Harvest and store
A year with an unusually large crop or sale can carry more tax than the years around it. Schedule J lets farmers figure tax by spreading all or part of this year’s farm income over the three prior years.
We run the figures with and without averaging so you can see the difference.
At: Sell
A drought can force a sale, and the gain that comes with it, in a year you did not plan for. When drought or other weather conditions force you to sell more livestock than usual, you may be able to postpone reporting part of the gain to a later year.
We check whether your sale qualifies and how much of the gain can be moved.
At: Year-end
Farmers can skip the quarterly estimated payments other businesses make. If farming was at least two-thirds of your gross income this year or last, you can either make one estimated payment by January 15, or file and pay in full by March 1.
We check the two-thirds test each year and plan the return around the date you choose.
Schedule F, income averaging and the March 1 date shape the whole filing year.
Books kept by enterprise (crop, herd) show which parts of the operation earn money.
Operating loans and equipment purchases need cash forecasts that follow the season.
Farmers can generally use the cash method, reporting income when received and expenses when paid. Some farm corporations and partnerships have limits. We check your entity.
If you did not make the January 15 payment either, you may owe an estimated tax penalty. It is figured separately on your return. We can calculate it with you.