There are few processes in life more frustrating than tax preparation. From filing to keeping track of receipts and slips, the rigmarole is enough to drive even the most well-adjusted, calm person crazy.
As a farmer, you're probably very familiar with many of these annoyances. But with the proper planning, they don't have to be as "taxing" or trying of your patience. The following are examples of common tax issues that come up and what you can do to mitigate them:
1. Keeping Reliable Records
The life of a farmer is nothing if not busy, making sure customers are taken care of, crops are fed and produce stays fresh. These tasks can make bookkeeping less of a priority.
Instead of waiting until days before filing day to get your paperwork into proper order, set up a system that lets you track income and your expenses throughout the year. That way, all you'll have to do is make some basic calculations and enter the appropriate fields when it's time to file.
2. Classifying Income
If it involves the rearing of animals or maintenance of crops, farmers are likely to put it all under one category. Not accounting for specific undertakings can make tax preparation harder than it needs to be.
Farming activity varies depending on what you're doing. As such, it's important to categorize your activity so that you know what the tax liability is for each, whether it's transporting goods, hiring, recycling or cultivating.
3. Identifying Tax Deductions
As one of Canada's main food suppliers, farmers are entitled to a wide array of tax deductions. Unfortunately, few are aware of what all of these are, leaving hundreds if not thousands of dollars on the table.
Speak with a qualified tax consultant or specialist about these deductions. They're experts on taxes and will know what deductions apply so that you won't miss out.
4. Tracking Legislation
Besides the fact that taxes can be hard to follow, it's made worse by tax law changes. Every year, there are a litany of them announced by the Canada Revenue Agency, which makes the filing and preparation process that much more complicated.
Time management is crucial to life as a farmer. Apply the same strategy you do to maintaining your gardens to keeping track of tax law changes. These adjustments are typically reported by the media and documented at CRA's website. Even if it's only a couple times a year, set aside time to educate yourself.
5. Planning For The Future
Farming is a very "what have you done for me lately?" type of industry. Because of this, it can be hard to plan for the future, as so much of farmers' attention is wrapped up in the now.
You should always have a plan for what's next when it comes to business development. A change in attitude may be necessary. For instance, if you consider farming to be little more than a means of paying the bills, you'll be much better by viewing it as an investment. Advisors at FBC will show you how.
We've created an infographic to illustrate these common tax issues. Click on the image to the right to see it.
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