Taxes

[Kell-inKY]

Couple of tax questions for a newbie, this is our 3rd year on a farm, it's only 60 acres but about 58 of it is accessible to cattle.

They have a form at Rural King that is a tax exempt form I guess. Everything I buy there is for the farm. Is this asking for trouble as far as the IRS, or is it a standard thing? I don't have a tax I.D.# but it doesn't ask for one either. Anything I purchase that would be for personal use I would do separately.

Also, on our taxes, I have tons of receipts for cattle vaccinations, gates, farm stuff in general, but i am wondering if I can claim stuff like dogfood for our farm dogs as well as their vaccinations? This may be a dumb question, but we would not have any cats or dogs if it were not for the farm, although the barn cats probably do more work in actuality.

These are just oddball things I wonder about, like boots/clothes that I purchase for the farm? I'm new to this, our taxes were always super easy in the past. Thanks

 

[Bigfoot]

Have your taxes done by an accountant that does a lot of farmers. I would get the farm exemption. It's silly not to.

 

[bird dog]

Your tax exempt form will tell you what is and isn't taxable. I am sure Rural King is like most ag type stores and their cash register knows what items are taxable regardless if you have a tax number. Clothes and pet food are generally not tax exempt but their are some exceptions.

 

[1982vett]

Also, on our taxes, I have tons of receipts for cattle vaccinations, gates, farm stuff in general, but i am wondering if I can claim stuff like dogfood for our farm dogs as well as their vaccinations? This may be a dumb question, but we would not have any cats or dogs if it were not for the farm, although the barn cats probably do more work in actuality.

Dogs have to have a purpose other than being a house/farm pet.

Now a grey area about cat food.....I feed mine just enough to keep them around for rodent control. Wouldn't have cats around for anything else.

 

[dun]

The tax exempt form is no big deal with the IRS. Those taxes are local/state stuff anyway. Anything you are curious about, ask your tax accountant/preparer. The piddly amount they normally charge is well worth it if they are experienced with preparing farm tax stuff.

 

[Aaron]

Get a good farm accountant. They are worth every penny multiplied by 5.

I would forget about using the dogs and cats expenses as deductions. Accountant will let you know for sure, but you have to be careful expensing every little thing under the sun, or you might start looking as a good target for an audit.

 

[tom4018]

Something that will save you some money on tax preparation is to total up things. For instance go thru your receipts and total up feed, then fuel, parts and so forth. You can download the Schedule F and see the different expense categories to get an idea. We were at the tax place one time and heard someone one comment, "oh no, not another shoebox". Seems one guy came in with a shoebox or receipts and another with a big bag full, said they spent hours sorting thru it. It was a ongoing process learning what needs to be separated out but it saves use time and money on getting ours done. I just have a miscellaneous column for stuff I don't know where to put and they figure it out. Probably less than a hour to do ours, I have everything listed on spreadsheets, or you can just write your totals for different things down.

The deal at Rural King is just about state sales tax, nothing to do with the income tax. I am not sure about the dog food stuff, maybe if they were working stock dogs. I have never taken clothes off. I would not want to do anything to raise a red flag.

Ask around your area, has to be someone in the tax business. We use an independent business, not one of the chains. Takes a while to get in sometimes but they are knowledgeable and cheaper. One is was taking longer than I wanted to get in and asked another place their prices and they wanted as much to do a regular filing as this place got for everything.

Getting mine done Saturday, hope I survive it.

 

[Kell-inKY]

Thanks for the input.

The dog food thing is because I have a whole bunch of receipts with farm stuff on it and then dog food, going through every receipt and subtracting the dog food was going to be a pain. Yep, the cats are for rodent control.

I will search our area for a farm accountant, the lady who does them now does a lot of businesses but we have always wondered if we should look around.

Thanks again.

 

[Kell-inKY]

Something that will save you some money on tax preparation is to total up things. For instance go thru your receipts and total up feed, then fuel, parts and so forth. You can download the Schedule F and see the different expense categories to get an idea.

That sounds like a winner, will look into that today.

I'm the shoebox guy since I wait until the end of the year to organize. I have already separated the major columns like you say, it's those weird things I don't know what to do with. I will do better next year, took me over an hour just to sort the receipts yesterday, and another hour to total them up, my wife bought me something to keep everything separate this time around since I do all the bills/paperwork.

 

[Brute 23]

Finding enough wright offs is usually not a problem in the cattle business, its finding enough revenue to justify them. I wouldn't push the cat food. Definitely check in to a farm account.

 

[Aaron]

Something that will save you some money on tax preparation is to total up things. For instance go thru your receipts and total up feed, then fuel, parts and so forth. You can download the Schedule F and see the different expense categories to get an idea. We were at the tax place one time and heard someone one comment, "oh no, not another shoebox". Seems one guy came in with a shoebox or receipts and another with a big bag full, said they spent hours sorting thru it. It was a ongoing process learning what needs to be separated out but it saves use time and money on getting ours done. I just have a miscellaneous column for stuff I don't know where to put and they figure it out. Probably less than a hour to do ours, I have everything listed on spreadsheets, or you can just write your totals for different things down.

The deal at Rural King is just about state sales tax, nothing to do with the income tax. I am not sure about the dog food stuff, maybe if they were working stock dogs. I have never taken clothes off. I would not want to do anything to raise a red flag.

Ask around your area, has to be someone in the tax business. We use an independent business, not one of the chains. Takes a while to get in sometimes but they are knowledgeable and cheaper. One is was taking longer than I wanted to get in and asked another place their prices and they wanted as much to do a regular filing as this place got for everything.

Getting mine done Saturday, hope I survive it.

Agree. Totalling everything up can save several hundred dollars. Accountants usually have a few women on staff that do just the shoebox tallying. Women, because no man has the patience to do that for someone else. An independent accountant that specializes in farm accounts is where you want to go. Ask your farming neighbors who does their taxes, particularly the bigger operators because they are the ones who are really uptight about avoiding taxes and will pay good money to do so. I can tell you that for his $400 fee, my accountant was able to hide 8k last year with seemingly very little effort (I think he keeps a magic tax wand in his desk) - made me sleep much better.

 

[1982vett]

To clarify on the Rural King thing....if the state recognizes it as an agricultural expense for taxes, you can bet the federal government does too. Just don't let that be the final word. Their are quite a few things the state taxes that are also legitimate farm expenses.

Now for the tickets that you have mixed personal expenses AND farm expenses. Yeah it's a pain to go through all of them now to break out. I'm at my desk right now typing this. I have also caught up my bookkeeping for the past day while its fresh on my mind which means I have gone through my purchases for yesterday and entered them into a bookkeeping program. Highlighted and categorized the items on the tickets. I even go so far as to make a copy so as to keep the file folder neater and easier to go back and find if needed. I write few checks these days, but when I do indicate what it was for. I try to use one credit card for the farm....Ideally I would only charge farm stuff to it but that's not likely to happen. What I'm trying to get across is record keeping is part of your farm JOB. It's important financial records up to date as well as animal health and production records. If doing it as you go you are less likely to forget or miss something. Starring at a ticket or note trying to remember what it was for nearly a year ago isn't fun at all. Now, while you are going through your pile of receipts....those item you bought for farm use on "mixed" tickets" AND paid sales tax on them. Yeah...figure that sales tax, note it on the ticket and use it.

Dad was a God fearing man....I think the only thing he feared more was the IRS. He once was one of the "shoebox" guys. He took his stuff in and they sorted it all out and Dad paid for that service. When I was 12 or 13, his accountant sat down with me and showed me how to organize his records and enter them into a ledger to save Dad the money and them the time it took for them to do it. All they had to do is check my work. I'll tell you, it is a lot easier these days with computer programs to do the math. Setting at a desk trying to total a spreadsheet and get it to balance with a pencil and scratch paper...................OH MY GOD. :lol:

Sorry if that sounded like a sermon.

 

[Bigfoot]

Get a separate farm account. When you get to the counter, ring things up separately. It will go a long way if you ever get audited.

 

[skyhightree1]

My cpa told me to keep receipts for things completely separate as its easier on him to add up.

 

[gimpyrancher]

Two different credit cards/check books and just separate the items before getting to the cashier. Two orders, two different payments sources. Then all the personal v business items are separated and if audited, it should make things easier.

I try to do these things upfront then at the end of the year, no extra time to put things together.

Let's just say, so far, it seems to work for me. :tiphat:

 

[M-5]

a few hours at the dining room table totaling things up is not that hard. I have kept every receipt I get for years. I do a monthly expense report for work so keeping receipts is no big issue. I Do not worry about the tax on stuff unless we are talking hundreds of dollars. I figure it is part of what will help me in an audit . I just take each receipt and put every item on it in its proper category . I also keep Extra receipts for that purpose and never claim everything down to the penny. after I get totals the receipts go into a shoe box are kept indefinitely. That way when I go to the tax preparer I have totals only and she likes it that way. I keep and accordion file in my truck and do my best to put receipts in by the month , but it never fails I always have a few receipts stashed in my jeep , junk drawer, and truck console.

 

[cow pollinater]

Three years ago I did my own taxes just to see how I came out compared to what my accountant did for me. His bill was less than half of what he saved me and when I was facing an audit he dealt with the whole thing and I wound up with the government owing me. I am the type to try to do things on my own but with our tax code and the details of running a business you really need the help of a professional.

 

[Caustic Burno]

To clarify on the Rural King thing....if the state recognizes it as an agricultural expense for taxes, you can bet the federal government does too. Just don't let that be the final word. Their are quite a few things the state taxes that are also legitimate farm expenses.

Now for the tickets that you have mixed personal expenses AND farm expenses. Yeah it's a pain to go through all of them now to break out. I'm at my desk right now typing this. I have also caught up my bookkeeping for the past day while its fresh on my mind which means I have gone through my purchases for yesterday and entered them into a bookkeeping program. Highlighted and categorized the items on the tickets. I even go so far as to make a copy so as to keep the file folder neater and easier to go back and find if needed. I write few checks these days, but when I do indicate what it was for. I try to use one credit card for the farm....Ideally I would only charge farm stuff to it but that's not likely to happen. What I'm trying to get across is record keeping is part of your farm JOB. It's important financial records up to date as well as animal health and production records. If doing it as you go you are less likely to forget or miss something. Starring at a ticket or note trying to remember what it was for nearly a year ago isn't fun at all. Now, while you are going through your pile of receipts....those item you bought for farm use on "mixed" tickets" AND paid sales tax on them. Yeah...figure that sales tax, note it on the ticket and use it.

Dad was a God fearing man....I think the only thing he feared more was the IRS. He once was one of the "shoebox" guys. He took his stuff in and they sorted it all out and Dad paid for that service. When I was 12 or 13, his accountant sat down with me and showed me how to organize his records and enter them into a ledger to save Dad the money and them the time it took for them to do it. All they had to do is check my work. I'll tell you, it is a lot easier these days with computer programs to do the math. Setting at a desk trying to total a spreadsheet and get it to balance with a pencil and scratch paper...................OH MY GOD. :lol:

Sorry if that sounded like a sermon.

CPA put me on a ledger book 40 years ago.
I record the receipts once a month in the book to avoid the monumental task at year end.
Still have every years receipt in expandable folder for the year the cost incurred.
I record it still by hand as I fear losing the data on the computer.
Spent yesterday morning at the CPA.
Your Dad was a wise man.