We are at the end of another calendar year and for most farmers this means the end of another income tax year. We have had a couple of good income years for farmers and this is where good tax planning and working with a good set of farm records can come in very handy. Many farmers in our area work with the farm business management instructors that we have in our area. Although there is a fee involved for their services, in my opinion, this is some of the best money that a farmer can invest in. This means that he or she is getting another set of eyes looking at their farm financial situation and another look and comparison of their farm to other like operations in the area. But one of the real values is assistance in income tax planning and preparation. Decisions of whether or not to take the rapid depreciation available under Section 179 or the 50% Bonus Depreciation options can be made at the time that you are completing your tax return. Funding an IRA is another important decision that does not have to happen until April 15th, 2009, so sales made in 2009 can provide the funding for the 2008 contributions. Purchases and sales that you want to include on your tax return need to be done by December 31st.
Tax returns for farmers are normally due by March 1st with the tax due at that time. If you pay an estimate of your taxes by January 15th, your tax return then will not be due until April 15th. For those paying tax estimates, remember to get them in the mail by January 15th. If you pay your Minnesota tax estimate in 2008, you will be able to increase your Schedule deduction. This can be a good strategy to lower your Federal tax but will not affect your Minnesota tax or your self-employment tax. For those intending to do that, remember that the state tax estimate needs to be paid by December 31st, 2008. A similar strategy can be used for your charitable giving, by donating in 2008, rather than the next year. By doing this you are including deductible expenses in 2008 that would normally occur in 2009. Those who regularly practice this end up itemizing their deductions one year and take the standard deduction the following year. This can be an effective strategy.
Another note of interest to farm tax preparation, there is a change in the date that 1099's are issued. These are the tax documents issued for such things as interest paid (1099-INT) and dividends distribution (1099-DIV). In past years these had to be issued by January 31st. Beginning this year February 15th will be the new deadline.
A helpful publication is available to help you with all of this. Farmer's tax guides are available from your local county extension office. This is a comprehensive publication put out by the IRS that addresses most farm tax issues and is an excellent reference for both the farmer and the tax practitioner. This publication is available on-line at http://www.irs.gov/formspubs/lists/0,,id=97819,00html
The 2008 version is 90 pages long so you really don't want to print one off unless you really need to. Give us a call at the extension office at 507-794-7993 in Brown County or 507-934-0360 in Nicollet County to receive a free copy.