How Your CPA Can Provide Helpful (And Valuable) Farm Tax Advice This Year

Jan 18, 2023 | Farm Business, Taxes

Farm taxes are most likely the least fun thing about being a farmer. Managing the land, working with the various stages of crop development, or taking care of your herd are much more enjoyable. You probably don’t climb up into the cab of your tractor each morning before sunrise filled will anticipation of spending time later filling out a 1040 Schedule F!

Few people get into agriculture with the anticipation of getting to file lots of taxes every year. However, just as with any other business, the IRS wants to make sure that farmers get to pay their share.

In this post, we’ll help you understand a little better what your farm tax involves and when to pay them so you can avoid unnecessary hassles and expensive penalties.

Who Pays Farm Tax?

Anyone who operates an agricultural operation as a business is responsible for paying taxes on the revenue they receive. According to the IRS, you are a farmer if you “cultivate, operate, or manage a farm for profit, either as owner or tenant. A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. It also includes plantations, ranches, ranges, and orchards and groves.”

Farm Tax Help

The IRS has provided a Farmer’s Tax Guide (Publication 225) for tax year 2022 to help walk you through all the tax laws that apply to farming. It can be a bit overwhelming, which is why we’ve put this post together.

As a tax firm that has operated in multiple locations across West Tennessee over the past 40+ years, we are very familiar with all that goes into farm taxes. So after reading this, you can reach out to one of our pros for farm tax help specific to your situation. 

Here are a few of the main questions we get about taxes as they relate to farming operations:

When Do Farmers Have to Pay Taxes?

Individuals who receive a paycheck from a business are able to have taxes withheld during each pay period. At the end of the year, when they file their taxes, they will either receive a refund for overpaying throughout the year or have a pay a small amount if enough was not withheld.

People who are in business for themselves (like farmers and ranchers) typically have to make estimated tax payments each quarter throughout the year. This is referred to as “pay-as-you-go.”

Tax Deadlines For Farmers

Estimated tax payments are due based on the following schedule:

  • Q1 (January 1 – March 31) – April 15
  • Q2 (April 1 – May 31) – June 15
  • Q3 (June 1 – August 31) – September 15
  • Q4 (September 1 – December 31) – January 15 of the following year

According to the IRS, “If you’re a calendar year taxpayer and you file your 2022 Form 1040 by March 1, 2023, you don’t need to make an estimated tax payment if you pay all the tax you owe at that time.”

Which Farm Assets Are Deducted In The Year Paid?

A common business truth we’ve all probably heard is “it takes money to make money.” Farming is no exception. In fact, it may be truer there than in many other types of business. The costs of the equipment and supplies farmers need to create their final products can be astronomically expensive.

Tractors can cost as much as a small house. Seed, feed, fertilizer and other “inputs” cost more and more each year. Unless you run a solar-only operation, there are also significant fuel and electricity expenses to consider as well.

The good news is that whatever up-front costs you have related to your ag operation, many (if not most) of them are deductible on your taxes at the end of the year. This include, but are not limited to:

  • Prepaid Farm and Livestock Supplies
  • Labor Costs
  • Repairs and Maintenance Expenses
  • Breeding Fees
  • Taxes
  • Insurance
  • Rent
  • Depreciation

These deductions along with all of your sources of revenue (including federal disaster payments, cooperative income, and money from farming programs) are recorded on Schedule F of your 1040 tax form. It can be one of the most important parts of your entire tax return! 

Added together, these deductions can represent quite a bit of savings at tax time. It’s something that farmers we work with as clients are regularly (and pleasantly) surprised by. 

Keep in mind too that there are several things that aren’t deductible as well:

  • Personal living expenses
  • Loss of crops or livestock
  • Costs of crops you don’t harvest
  • Repayment of loans
  • Dues, fees, fines, & penalties

So to make sure you’re keeping as much of your hard-earned money as possible by deducting the right expenses, schedule a call with our farm tax experts as soon as possible.

For more on the topic, be sure to read a post we did on “17 Agriculture Tax Deductions That Can Help Your Farm Keep More Cash.”

You Need An Experienced Farming Specialist Tax Advisor

When it comes to running a successful agricultural business, you’ve already got a lot of things to do. Managing complicated farm taxes shouldn’t be one of them. 

Our team of tax and accounting professionals has been helping farmers and ranchers just like yourself for over 40 years, so we’ve encountered nearly every situation you might be facing. And we’ve been able to save a lot of farmers a lot of money! 

With offices all across West Tennessee (Jackson, Dyersburg, Milan, Paris, Brownsville, Martin, and the new Blue Oval City), we’ve got someone near you ready to relieve the stress of tax season and let you focus on farming.And our tax services go way beyond just filing them too. So schedule a call today to find out why we tell our clients to “expect more from your CPA.”

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