California Accountant for Farms and Agriculture
Call our California accountants for farms and agriculture for more information about tax planning services for your farming and agricultural business.
Agricultural businesses enjoy many unique benefits offered by the Internal Revenue Service. This is likely because the IRS acknowledges the volatile nature of being a farmer and how a business can suddenly experience losses. Learning how tax regulations work for farmers can help you determine strategies to operate your farm more efficiently. If you require accounting services for your farming business, contact an experienced California accountant for farms and agriculture.
At Cook CPA Group, we are prepared to help you understand all the tax and accounting benefits provided to you as a farmer. Our company is devoted to working with businesses throughout the State of California, and we would be honored to work with you.
Tax Tips for Farming Businesses
With how quickly issues can begin with crops and livestock, farmers often have enough on their plate to deal with on a day-to-day basis. However, it is still important to take time to understand how ever-changing tax regulations affect your business. The following is a list of tax tips that may apply to your farming business.
Do Not Define Your Farming as a Hobby
Identifying your agricultural business as a hobby will ensure that you do not receive the same protections from the IRS as farms that are categorized as a business. Of course, this also means that you should not try to classify your backyard garden that earns minimal profits as a farming business for tax purposes.
The IRS has provided farmers with a tax guide referred to as “Publication 225,” which touches on various topics for farmers, including the criteria for classifying your farm as a business. The following is a list of requirements for operating your farm as a business:
- The amount of time and work performed on the farm (having a full-time job might be used as evidence that your farm is not a business)
- Whether you depend on income from your farm to live
- Any losses sustained on the farm were attributed to unforeseeable circumstances
- You try different farming methods to increase your profits
- Whether you have or researched the knowledge to operate a successful farm
- Whether you earned a profit in some years or consistently operate at a loss
If the IRS believes you are not making an effort to run your farm efficiently, it is possible that your farm may be deemed as a hobby instead of a business.
Home Office Deduction
If part of your home is used to support your farming business, you may satisfy the requirements of the home office deduction. To qualify for the home office deduction, you must use a portion of your home exclusively for work related to your farm. The home office deduction lets you list expenses for the maintenance of your office on your tax return.
Be sure not to have another area of the home where you perform farm-related business as the IRS is closely watching taxpayers that attempt to abuse this deduction.
Consider Paying Family Members for Work
The wages for your employees are deductible whether those employees are strangers or your family members. One advantage of employing your children on a farm is that you do not have to pay social security taxes from your child’s wages if your child is under the age of 18. Additionally, it may be possible that the clothing needed to perform the job are also deductible.
It is important to note that children are subject to many of the same rules as non-family employees, meaning you will have to keep business records regarding work performed by your child. However, the wages paid to a child can be used for other purposes, like starting a retirement account in their name.
These are just a few of the tax issues that may concern a farm owner. Cook CPA Group is here to help you resolve any financial issues you encounter with your farming business from the preparation of tax returns to strategic business planning. We will work tirelessly to ensure that your farm is taking advantage of all the unique benefits of operating a farm in the United States.
Contact an Experienced Roseville CPA for Farm and Agricultural Businesses
If your agricultural business is in need of accounting services, contact an experienced Roseville CPA for farms and agriculture. The accounting team at Cook CPA Group possess decades of combined accounting experience, and we are prepared to use that knowledge to provide your business with the accounting services it deserves.