where to start

[Texican]

dang, so much to learn, but so far, it has been fun learning it. For sure some of you guys talk and discuss topics way beyond my interest. lol

first couple of questions, are about federal income taxes.

my first year with cows.
I had to place some new fencing around my property.($1000)
I bought two cows.($1200)
I bought a small tractor, with shredder, box blade, and trailer.($6000)
I've bought feed.($300)
I've bought hay.($150)
I've bought herbicides.($200)
I've built a small barn/shed, to store the hay/chemicals.($2500)

my wife and I have 4 children.
let's say I've spent around $11500 last year.
is it worth it to claim these items, on my taxes?
are all of these items even claimable?(is claimable a word?)

I have tons of other questions, but I'll save those for a new thread.

thanks for any insite.

let's say all together this year, I have spent a

 

[Caustic Burno]

Yes they are deductable. Get yourself a good CPA you can get in over your head fast here.
Remember there is no parole in the Federal Pen.

 

[TexasBred]

Texican all those things mentioned can be deductions and I'm sure you'll find more when you go to looking seriously thru your checkbook. If you have doubts about a deduction "take it". If you get audited all they will do is disallow it and tell you that you owe an addtional $1.95 in taxes. (You're CPA knows all this already) But never, never, never fail to report income. That's evasion and will definitely get your hands slapped seriously.

 

[Texican]

so what you folks are suggesting is a CPA? lol

probably would be best. It would be the first time I've ever had to use one, I think I'm starting to feel important.

thanks for the suggestions.

 

[mgman]

The CPA advice is a good idea-not only do they know what you can and can't claim for deductions, they will know about depreciation on your farm building(s) and equipment. It's money well spent to leave your taxes to someone who knows what they're doing when you are dealing with a farm business.

 

[John Wayne]

As the others said these can be deductions, and they are deductible. Some have to be amortized some may be taken in that tax year. But the I R S makes a big distinction between a working farm/ranch and a hobby farm. The rule of thumb is you must not show a loss for more than 2 years out of the last 5. In other words you cant just use your hobby as a tax write off. There have been a few court cases recently that have addressed this issue and I'm sure they were expensive for the folks involved. As has been stated your tax accountant will know, that is if you get one that works for farmers/ranchers. Another big problem could be co-mingling of funds. Set up a farm account and use it for all of your farm needs it is a cheap easy way to help keep records. Dont mix it with your pay check from your town job. This all assumes that you want to make a profit from your operation of course. Good luck.

 

[Texican]

thanks for the suggestion about seperate accounts.

right now, I would consider what I have as a hobby farm, but I am looking at ways to change it to a profitable endeavor.

viewtopic.php?f=8&t=43960

feel free to add or adjust my thinking on any of my options.

 

[Hippie Rancher]

Turbotax on line will do it for about 15 bucks - pretty easy, just follow instructions and you can stop or go back anytime before you send it off. http://turbotax.intuit.com/

 

[skyline]

I used to use Turbotax. About 7 or 8 years ago I started taking a shoebox of receipts to a CPA and coming back to sign my return a few days later. I enjoy April much more now.

 

[Jogeephus]

I'm not a tax person but I do have plenty of experience with paying taxes and I do use a CPA. They are costly but are money well spent in my situation. Using info from your other post, I think you would be hard pressed to prove to the IRS that you are running what they would call a legitimate farming enterprise with just 11 acres of fenced land. Once you turn in these deductions, they are going to expect you to show a profit in a few years otherwise you might have to pay some penalties and stuff if they check you and determine in their opinion that your venture is a hobby. This might and would probably come at the worst moment possible. Once you turn in these deductions, you are raising a big flag saying LOOK AT ME. I would suggest looking at how much you already have as deductions with you family and children then consider whether or not it would be best to keep the flag furled in the closet. Though I don't golf, I have a friend who has taken up golf as a hobby. I'm pretty sure he doesn't claim any winnings he makes on the green in this hobby. I think he is supposed to but I don't think anyone really keeps track of his bets cause after all - its just in good fun. Cattle can be fun too.

 

[grannysoo]

My account (cpa / rpa) is also my friend and we have had conversations like this before. According to him, the biggest "test" of an operation like yours are your intentions.

Do you intend to make money or do you intend for this to be a hobby.

If you intend to make money, you should be using the tax benefits of deductions and depreciation because that is one of the things that will help you make money. If you intend for this to be a hobby, just suck up the expense and let it be your hobby....

If you intend to make money, you will do things differently than if this is just your hobby.

 

[Jim62]

From what little I know about "hobby" farming, I think you can deduct expenses only to the extent of your income. You can not show a loss. Seems to me that you'd have a wash each year. In that case, I don't see what the advantage would be in all the record keeping and such.

I don't think that most people report any income from their hobbies--like maybe buying cars and fixing them up and selling them. Why would a hobby of farming be any different?

Just wondering........