Farmers and Tax Returns
Farmers are a mainstay of the American economy, and are frequently treated a little differently come tax season. Farmers may have specific rules or exceptions that apply to them, that won’t apply for other businesses. Therefore, when tax season rolls around, farmers will need to be well equipped to deal with any potential issues that arise with their taxes or at least remembering the variables that can affect their tax filings.
Here are some things to keep in mind if you are a farmer filing for the tax year:
If you have crop insurance proceeds, these will count as income. They will usually need to be reported on your income statement in the year they are received.
Deductible farm expenses are a key deductible for farmers. Farmers are allowed to deduct ordinary and necessary expenses that are paid for their business. An ordinary expense is a common and accepted cost for the type of business per the IRS. Necessary expense is defined as, “a cost that is appropriate for that business.”
Farmers may also deduct reasonable wages paid to your farms’ full and part-time workers. The farm owner will need to withhold Social Security, Medicare and income taxes from their wages.
Farmers have a different style of business than most of the United States because of the seasonal nature of their work and potential for losses depending on the year. Make sure your farming based clients are getting the best possible tax returns by keeping up with their yearly deductibles. If you have questions about specific tax issues, contact the professionals at the Center for Financial, Legal & Tax, Inc.