Sacramento Accountant for Farms and Agriculture

Cook CPA Group

As a farmer, much of your time is spent ensuring the prosperity of your farm and your crops. With this consistent responsibility on your shoulders, it is understandable that taking time out of your day to decipher complex tax laws can be a tedious process. However, learning about tax regulations regarding farming and other agricultural activities can help you operate your farm more efficiently. If you require assistance managing tax liability for your farm, contact an experienced Sacramento accountant for farms and agriculture.

The accountants at Cook CPA Group are ready to work with you to take advantage of tax laws that benefit your farming business. We understand the challenges that an agricultural business faces on a yearly basis, and we are here for you. To schedule a free consultation to discuss your tax options, contact Cook CPA Group at (916) 259-5496, or contact us online.

Tax Tips for Farmers

If you are in the agricultural business, it is important to note there are various benefits that the Internal Revenue Service provides for farmers. The IRS understands the unpredictable nature of agricultural businesses, and there are many benefits available to farmers that are prepared to claim them. The following is a list of tax tips that farmers should utilize to help their farm operate more efficiently.

Determining Whether You Qualify as a Farmer

Before you attempt to file taxes as an agricultural business, you should determine whether your agricultural activity as farming or simple gardening. The IRS states that a taxpayer qualifies as a farmer if they manage or cultivate a farm for profit, whether the farmer is the owner of the farm or they live on the farm.

There are various activities that meet the requirements of farming, like operating a plantation, ranch, orchard, and raising livestock. However, operating a garden in your backyard and selling what you harvested does not qualify as farming but will likely be seen as hobby income.

Thorough Recordkeeping

Thorough recordkeeping is an extremely important part of every business. Keeping comprehensive records will help you accomplish various goals, like monitoring the success of your farm. Records can show you the income earned by your farm, the crops, and livestock that yield the most profits, the areas of your business that can be improved, and can highlight other positives and negatives of your business.

Recordkeeping will also help you draft financial statements for your business. A financial statement is utilized by business owners to document the profits and losses of a business, the cash flow of a business, and even the equity of the business. Additionally, financial statements can be helpful when negotiating when dealing with creditors and other financial institutions.

Perhaps most importantly, keeping thorough records will make it easier to file tax returns for your farm. Further, if the IRS challenges the information provided on your tax returns, your records will help you explain any perceived errors on your tax forms.

Know Your Streams of Income

Due to the nature of the agricultural business, a farmer must be aware of their streams of income, and what types of income must be reported to the IRS. The following is a list of agricultural income that must be reported on a tax return:

  • Sales of livestock
  • Insurance proceeds from crop insurance
  • Federal funds provided for crop failure
  • Tax credits provided for gasoline and fuel

This is not an exhaustive list. There are other types of income derived from farming activities that must be reported to the IRS.

Tax Deductions

There are various deductions that a farmer could be entitled to depend on their expenses. The following is a list of deductions that may be available to a farmer:

  • Expenses for seeds and plants
  • Medical costs for livestock
  • Depreciation of farming machinery and other items
  • Expenses for fertilizers and lime
  • Mortgage interest

It is important to note that there are some expenses that cannot be claimed as deductions for farm expenses:

  • Living expenses unrelated to the farming business like renovating your home
  • Expenses for raising crops or livestock that you use personally
  • The value of livestock that died
  • Inventory losses
  • Personal losses

There are many other tax breaks provided to farmers that can alleviate the unpredictably of their business. Cook CPA Group can ensure that you do not miss out deductions or tax credits that you have earned.

Our California Agricultural Accountants Can Help You Manage Your Tax Liability

If you require accounting services for your agricultural business, contact an experienced California tax return accountant. The certified public accountants at Cook CPA Group possess decades of combined accounting experience, and we would be proud to use that experience to represent you and your business. To schedule a free consultation with one of our dedicated accountants, contact Cook CPA Group at (916) 259-5496, or contact us online.

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