It feels like the end of the year is always right around the corner… especially when it comes to tax preparation. But year-end and the inevitable IRS filing deadlines that go with it, wait for no one.
What are some of the most costly, but avoidable, mistakes farmers make surrounding tax planning? * According to Penn State University Extension:
1. Farm Business Structure
In other words, not understanding the tax ramifications of how your business is organized. Reviewing your farm’s legal structure, whether it’s formed as a sole proprietorship, partnership, LLC or corporation can impact your tax obligations.
2. Timing of Income and Expenses
Alex Vasichek, Agricultural Focused Financial Planner at Elevate Financial in Fargo, concurs: “Late in their careers, retiring farmers have a tendency to store grain instead of selling it. That can expose you to unnecessary tax burdens. The same goes for going into debt to avoid certain taxes. Having a strategy on the way in AND out is critical.”
3. Lack of Depreciation Planning
Depreciation allows you to spread out the cost of pricey equipment across the life of the implements and machinery.
…having a strategy on the way in AND out is critical.”
It’s Time to End the Waiting Game
It’s not uncommon to wait until the last minute to organize, prepare and file our taxes. What causes us to procrastinate? Fear? Anxiety? Yes and yes. It’s human nature.
“Plus, it’s a lot of work, especially if you haven’t been keeping up with it,” Vasichek said. “Think of it as a workout or run. No matter how much you’d prefer to relax in the comfort of an easy chair, you’re relieved and grateful once it’s over.”
“The best way to avoid that anxiety is to never get there in the first place,” he said. In other words, when you’ve been doing your due diligence every other month or so, the end of the year is just the end of another period.
Find an Experienced “Quarterback”
No farmer or rancher wants to face tax season alone. “Having someone to help you plan takes the burden off,” Vasichek said. Oftentimes Elevate’s role starts out as an educational or situational one.
“Clients come to us for help with a specific issue such as a milestone in the life of the farm, or problems that arise between business partners or family members. They’re overwhelmed and not sure who to call. We listen to them to get the ball rolling for all things tax-related.”
While Agricultural Focused Financial Planners like Vasichek can be critical to a farmstead’s tax strategy, they aren’t allowed to give specific tax advice: “That’s when we work side-by-side with a client’s trusted tax professional or someone we can recommend for them. Either way, we work closely with whoever our client designates to quarterback the process.”
Tractor cultivating field at spring,aerial view
Vasichek, a * 2024 Forbes Best-in-State Financial Security Professional* , thinks of his team as a farmer’s CFO: “We’ll suggest meeting quarterly to develop a comprehensive and ongoing strategy that includes evaluating cash flow statements, income statements, balance sheets, insurance, investments and of course, tax planning.
We believe clients should feel comfortable reaching out to us directly, anytime. We always take their call and calm their nerves.”
It’s Never Too Late
Even though we’re deep into 2024, the weeks following harvest are a great time to develop a snapshot of the past year. By meeting with an Agricultural Focused Financial Planner, assessing your financial situation, collaborating with a tax planning professional and implementing taxsaving strategies, you may be able to minimize your tax liability and bolster your farm’s financial stability. Not to mention, reduce your level of stress.
Alex Vasichek Agricultural Focused Financial Planner
*Penn State Extension, “Year-End Tax Planning for Farmers: A Through Guide, October 30, 2023
Alex Vasichek is a registered representative of and offers securities and investment advisory services through MML Investors Services, LLC. Member SIPC. Supervisory Office: 100 South Fifth Street Suite 2300 Minneapolis MN 55402. 612-333-1413. Elevate Financial is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. CRN202710-7480205
