For the average Canadian, the year starts in January and ends in December. But for your typical farmer producer, the year begins when seeds are first planted and ends when the fields are put to bed. It's over the course of these months that farmers' singular focus is on what they produce and sell to their customers.
But as with every business owner, farmers have to devote part of their attention to what they've earned in the past year so they can make the necessary information known and available to the government.
The following tips should help you prepare your farm income quickly so you can put your focus back on what's most important - the upkeep and cultivation of your crops.
1. Understand What Farm Income Is
Of course, farming is an umbrella term that references more than only grain and vegetable production. Farm income includes a variety of activities, such as soil tilling, Christmas tree growing, beekeeping, fur farming, poultry raising, racehorse maintenance or feedlot operation.
Additionally, other forms of farm income may include raising fish, operating a nursery or greenhouse, as well as maple tree tapping for commercial use. There are some exceptions, however, that may apply, so it's a good idea to talk to an FBC tax professional when there are other factors that may be unique.
2. Know What Farm Income Does Not Include
Just as key to knowing what farm income is taxable is what money is not considered earnings. If your income is from trappings, for instance, this isn't considered farming income. Also, if your earnings came from working as an employee in another farming business, this also isn't considered farming income, thus isn't subject to the same tax rules.
3. Use Correct Forms
Tax reform efforts by the government have tried to simplify the tax filing process. But it can still be confusing trying to figure out which form is needed. When preparing your farm income, you can use Form T2042 from CRA. This is also the form you'll use to make a formal statement of your farming activities.
For additional tips regarding farm income, talk with an FBC professional.