ST. PAUL, Minn. (2/1/2010) —As the month of February approaches, farmers should prepare for the annual trip to the tax preparer. While each farmer's situation is unique, there are several items nearly everyone should check off their list prior to arriving at a tax appointment.
First of all, make sure to have a copy of the most up-to-date accounting report for tax year 2009. Communicate with your tax professional as to what type of report to produce. As you assemble your year-end accounting report, be aware that expenses such as utilities, fuel, property taxes and business vehicle use must be examined to determine the business portion of those expenses. If you don't reflect the business use in the accounting report, make sure to have notations prepared to share with your tax professional.
Generally, income received within the business year is taxable. If you sold commodities using deferred payment contracts, make sure to bring those contracts to your appointment. Also make sure to include any paperwork from Farm Service Agency that addresses government program payments. If you received any crop insurance payments in 2009, bring along any supplemental paperwork showing the total insurance benefit plus any insurance premium that may have been withheld.
You should bring all tax documents to your appointment that are used to report income to the Internal Revenue Service. Federal reporting documents include W-2s and 1099s. Any money reported on these forms must be included on your tax return.
Some 1099s may not necessarily arrive at the end of the year. 1099s reporting patronage from a cooperative may have been mailed earlier in the year. You will have to contact the cooperative for a duplicate copy if you have misplaced the form.
While most farmers are cash-basis tax filers, accrual basis filers must also bring a complete listing of farm inventory to the tax appointment.
Additionally, the farmer should include records of medical, dental, property tax, education, and health insurance expenses. Most tax professionals will supply you with a checklist of items to bring along to your appointment.
Finally, I recommend packing a copy of last year's tax return and accounting records. Adequate preparation for your tax appointment helps to decrease your stress and also helps your tax professional accurately prepare your income tax return.
For more farm financial information, including a tax update for farm
families, visit University of Minnesota Extension's Agricultural
Business Management website at www.extension.umn.edu/AgBusinessManagement/
Any use of this article must include the byline or following credit line:
C. Robert Holcomb is an agricultural business management educator with University of Minnesota Extension.
Media Contact: Catherine Dehdashti, U of M Extension, (612) 625-0237, email@example.com