Five tips to make tax season a little easier
By Diego Flammini
Assistant Editor, North American Content
Farms.com
Unfortunately, tax season is right around the corner, and to date, there appears to be nothing that can be done about it.
However, there are things that farmers in the U.S. can do to ensure they’re as prepared as possible when having their taxes done.
Ed Maxwell, a tax specialist with Farm Credit East in Cobleskill, New York, outlined five pointers for farmers to consider before their taxes are prepared.
“Have good records first and foremost,” he said. “If the client doesn’t have good records they’re going to be shooting in the dark. There’s nothing tax-wise we can do for them if they don’t have good records.”
Maxwell’s second tip refers to who farmers decide to prepare their taxes.
“Get in touch with an ag-specific tax preparer,” he said. “Because there are so many different rules for ag businesses compared to general businesses. Agriculture has a lot of tax-code specific things that general tax preparers may not spend much time on.”
Tip number three relates to income averaging.
“Farmers are allowed to average their income,” Maxwell said. “If they had a successful year they can spread it over the three previous years and take advantage of lower tax brackets.”
Maxwell’s fourth tax tip for farmers is about fuel credits.
“If they’re using gas for off-road vehicles (ex: tractors, combines) on the farm and paying all the taxes up front on the gas they can get that returned,” he said. “There’s highway taxes in the price of gas and they wouldn’t have to pay that.”
The fifth tip is about farmers using the estate and gift tax exemption.
Maxwell said an individual farmer can leave $5.45 million to their families without paying any federal estate or gift taxes. A married couple can leave up to $10.9 million tax-free.
Need more tax tips? The IRS has a list of 10 things farmers should know about income and deductions.