Prepping For Tax Time

Most farmers are assessing their net income going into December and deciding if this year is likely to be better than next, or vice-versa. The numbers will help with year-end tax strategies.

Shawn Williamson is a CPA with the Fick, Eggemeyer, and Williamson firm in St. Louis, Missouri. He says if you've had a great year you might accelerate expenses and defer revenue. But, don't sit on your December checks because a check-in-hand is revenue regardless if you cash it this month or in January.

"You have a check dated December 2nd, and it somehow doesn't get deposited until January, the IRS is going to be awfully suspicious that you didn't really have that check in hand until January. The grain elevators, they can say oh yeah, we mailed that check out November 29th," he says. "That can get an IRS agent agitated if they find that you've been holding checks with the purposes of deferring the revenue into the following year."

If you're losing money, Williamson recommends reversing the strategy. In this case, accelerate revenue and defer expenses.

"You might say, why would I ever accelerate revenue? Well, you might do that to make a banker happy, and also to smooth out your revenue. So, if you're losing $100,000 in a given year, you have the option of moving $50,000 or $60,000 back into December and showing a $40,000 or $50,000 loss instead of a $100,000 loss," says Williamson.

He says another reason not to show a huge loss is that losses over $100,000 tend to invite IRS audits.

Find more year-end tax timing tips.