Your Future Self Will Thank You For This | When To Start Tax Planning as a Farmer or Rancher

Can you imagine a world where November or December comes around and your numbers are organized, you know exactly how much money you can get approved for, what equipment you can or can’t buy to get a tax write-off, and feel peace of mind about the next year's taxes going into the holidays?

If you said no, I encourage you to keep reading…

Q3 is the best time to start tax planning, but most farmers and ranchers wait until the holidays while the banker is on vacation, they have personal commitments that are draining their time and energy, and can’t sleep at night because they’re not sure if Uncle Sam is going to foot the bill for that fancy machinery they bought without consulting their accountant.

These are the main reasons you want to start your tax planning in September/October:

1. Reactive vs Proactive Tax Planning.
   1. There is a difference between reactive and proactive tax planning. If you have your numbers in order in advance, you know what you can and can’t spend money on instead of buying massive things you don’t need to get a little off your taxes. By talking with your accountant in advance, towards the end of the year you’ll know what your tax liability is and exactly what you can and can’t do with your money. Taxes are stressful, and waiting until tax season to get organized is never a good idea. 
   2. How do you proactively tax plan? Use a simplified system like Farmer Metrics that will make it easy to track your income, expenses, and revenue.
2. Bank Authority.
   1. If you wait until the last minute to get a bank loan, what is that telling the banker about how you run your operation? Last minute and hectic. This could impact your interest rates, your bank terms, and your overall eligibility for funding. Instead, start having conversations with your banker in October or November about the best next steps for your operation.
3. Unplanned Expenses.
   1. Every once in a while you will run into a windfall year, which results in a massive amount of taxes that need to be paid. What many farmers and ranchers do is they try to buy things they don’t need to avoid paying taxes, and this may work for a few years, but ultimately will bite you in the rear when Uncle Sam’s bookie comes knocking on your door.

Don’t have a great accountant? We recommend working with someone like Ag Accounting Services who is Ag focused and has the experience, knowledge, and integrity to make your life easier as a farmer or rancher.