Once you finish harvest, tax planning might be the next item on your list. Don't put off that meeting: late fall/early winter is an important time to meet with your tax accountant and get a solid tax plan in place.
I think farms have a unique opportunity to do tax planning that makes a difference – in a way that most other businesses can't. Digging into your tax planning this year can help you stay ahead.
Take the opportunity to meet with your tax accountant once you're done harvesting. Work with them to get a plan in place to address the current tax year. Once you've done that, it's a good time for some more strategic planning as you look ahead.
You and your tax accountant need to talk about what you envision for the future of your operation. In ten years, where will your operation be? Will you be expanding your operation? Are you on your way to retirement? Do you foresee that your business entity may change?
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These are very important questions that your tax accountant should be asking. Your accountant can work to create a long-term plan for you when they understand where you see the operation going. Then they can implement that tax strategy in the years to come.
Focusing only on the short term might result in paying less in taxes now, but a short-sighted outlook could make things tougher in the long run. The tax plan needs to make sense for your operation as a whole – taking the whole situation into account.
A relationship with a tax accountant who deeply understands agriculture is important. Good ag tax accountants will keep themselves on top of new farm legislation. They can update you on new developments in the tax code that will affect you and your business. With changes every year in the tax rules for farms, it's more important than ever to work with someone who specializes in ag tax.
Good communication with your tax accountant is a must – and they should be proactive in communicating with you as well. Tax planning isn't just an end of the year activity. Periodic updates about what's going on in your operation keep you and your tax accountant on the same page. They should follow up with you to make sure everything is on track and on time for your taxes.
I know tax planning may not be your favorite thing to do. It certainly isn't for most farmers. But a good, future-oriented tax plan can help as you guide your operation toward what's to come. That's especially critical as we move into what could be a new economic cycle in Ag.