- Special Sections
- Public Notices
Agricultural experts from Vermont to California will tell you that famers need good accountants as much as they need good weather.
“As the tax laws and business have changed, it’s gotten so much more complicated,” said Jim Ellis of Ellis Farms. “Plus, they [accountants] can do it a lot faster than we can.”
For farming, like most businesses large and small, tax time isn’t relegated to mid-April. There are myriad different tax rules and regulations that must be followed. IRS Publication 225 is the handbook for farm taxes, outlining when items are due, what can be deducted and what is required.
“It’s dry reading and can be pretty complicated,” said Leonard Ballard, the founder of L. Ballard & Company PSC Certified Public Accountants. “As far as never letting it leave my side, I’ve been doing this for a long time, so I don’t worry about it as much. It covers all the bases, though.”
Ballard started his firm in 1980.
Starting with estimated taxes, due in January, there is a litany of items that farmers must keep track of to note on taxes, from crop insurance and deductions to employee information and weather-related sales, dozens of items are required by the IRS.
In fact, just as there was a delay in sending in personal income tax returns this year because of the delay in tax code reform in Washington, farmers and fishermen received a one-time extension to have their full payments in by Monday.
“Because of the fluctuation in prices during the year, farms, unlike most, don’t have taxes taken out during the year,” Ballard said. “Normally, they must have their taxes filed and paid in full by March 1, to avoid a penalty for under payment [after paying estimated taxes in January]. But because of the delays this year, it was extended to April 15.”
But, Ballard said, the biggest key for farmers is learning to manage taxes.
“They [farmers] have the advantage of having at least some control over when their income comes in and when their major expenses occur,” he said. “It can be difficult to balance, but they can take advantage of expensing a large piece of equipment one year, but then they won’t have that depreciation another year. They can also take advantage of when to sell or how to work with futures.”
But Ballard was quick to point out that using those options doesn’t allow farmers to skip out on taxes.
“Over a number of years, it all balances out, but the key is to make sure you’re not paying large amounts one year and nothing another year,” he said.
Ellis agreed. “You have to look at a balance sheet more now over the last twenty years.
“You don’t necessarily buy a piece of equipment because it will be a tax benefit. You buy it because you need it, but you have to balance what you can claim.”
Ellis, who is semiretired and is helping his son, Seth, take over the family farm, said that’s something he is stressing to his son.
“Managing the farm business and knowing the taxes, that’s the most important thing aside from putting the right seeds in the ground,” he said. “I’ve been doing this for 41 years, and in the early period we would grow crops and take them to Bagdad, or wherever the market was and see how we did. Now we sell one third of crops on futures. Over the last twenty to twenty-five years it’s really changed from ‘put in the ground and grow it’ to more of a focus on business.”
That focus has led the Ellis Farms to make several changes over the past few years.
“We’ve kept enough records over the years to be able to see if a change was going to make sense,” he said. “We closed the dairy and got out of the hog business because we could see we just weren’t going to make enough money from them.”
Like Ballard said, “You just don’t want to be surprised. You have to know where you are know so you can plan for the year ahead.”