Big Dividends with Early Tax Plans
By Dennis Stein
Farm income for 2011 has the potential to be very good for many farms and that increases the need for earlier tax planning.
Most farms will have a tax planning session in December with their tax advisor to do a last-minute check of the year’s income and expenses to get a handle on potential tax liabilities.
At that time some additional income or expenses may be recommended to balance the farms taxable income to fit the operation’s desired tax situation.
In my experience, spending time on properly managing your income tax strategy can save a farmer more than $5,000 per hour spent on the process. That’s a good rate of return for any agricultural enterprise.
If you wait until December of the tax year to plan your strategy, you severely restrict the number of options available to you. In the current environment, many equipment dealers have limited inventories of equipment remaining. Capital investments such as new buildings cannot be adequately planned or financed.
At the same time, decisions have to be made about when to sell this year’s crops so that the income is received at the most advantageous time for the grower’s tax situation.
The other side of tax management may be to increase or decrease input costs to manage the farms taxable income. Just going out and buying big ticket machinery may help in tax control. However, it may not be the best management strategy to position your farm for the challenges of 2012.
You may want to consider using the Tax Estimate Worksheet from TELFARM. This simple-to-use, one-page form can give you a close estimate of your farms current tax situation, and the information you need to plan forward.
If you want to continue getting up to speed and thinking farm tax management, download this Tax Management Tips information sheet. This information sheet lists various farm tax management tips and tactic’s that farm managers can use to manage farm business and manage the farm’s tax situation.
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