Harvest Your Profits: Smart Tax Planning for Your Operation

Tax season can feel overwhelming, but with a little preparation, it doesn’t have to be. The key is knowing what documents and information to have ready so you can make strategic decisions, maximize deductions, and keep your operation running smoothly. Here’s a breakdown of what to gather for your tax planning session.

Financial Records

• Financial Statements
  Bring your profit & loss statements, balance sheets, general ledger, and cash flow statements (or an Excel version). These give your CPA, or whoever does your taxes, a clear picture of the health of your operation and help guide decisions such as prepaying expenses or investing in new assets.
  

• Bank Statements and Loan Documents
  Collect 12 months of bank and loan statements with interest details. These help your advisor understand cash flow, verify interest deductions, and ensure your financial statements are accurate.
  

• Capital Assets
  Include equipment, vehicles, land, buildings, and improvements tied to your operation. Bring depreciation schedules to review potential asset sales or purchases, stay compliant, and better understand your organization’s value.
  

• Inventory Reports
  Crop inventory, livestock counts, feed, seed, fertilizer, and supply inventories should be documented to accurately calculate cost of goods sold and track income.

Income and Expense Records

When it comes to income, gather everything that shows money coming into your operation: sales receipts, government payments like 1099-Gs, crop insurance proceeds, dividends, patronage income, custom hire work, rental income, or any other revenue streams. 

For expenses, bring all the details you can: insurance premiums, feed and vet bills, supplies, rent or lease payments, property taxes, transportation, and other operating costs. Even if most of this is already recorded on your financial statements, having the detailed records on hand gives your tax professional backup documentation and helps ensure nothing gets missed.

Tax-Specific Documents

Bring your prior year federal and state tax returns along with any supporting schedules. You’ll also want to have payroll tax reports on hand, including forms 941/943 for FICA, 940 for FUTA, and any state unemployment insurance or withholding reports. Don’t forget to include a record of any estimated tax payments you’ve made throughout the year. Having all of this ready helps your professional review your past filings and plan effectively for the year ahead.

Planning and Strategy Items

When it comes to planning and strategy, bring any notes or documents related to future purchases or investments, things like planned equipment upgrades, expansion projects, or conservation initiatives. These details help your CPA time major purchases and investments in a way that maximizes tax efficiency. You’ll also want to include information on retirement and succession plans, such as SEP IRAs, 401(k)s, estate plans, or ownership transfers, to make sure your long-term goals align with your financial and tax strategy.

It’s also important to review your insurance and risk management coverage, including crop, property, liability, health, and life insurance policies. This ensures you’re getting the right deductions and maintaining adequate protection against potential losses. Lastly, don’t forget to include any information about government or grant programs you’re part of, USDA or FSA programs, cost-share or conservation grants, renewable energy initiatives, or carbon credit programs. These can offer valuable credits and cost-share opportunities that help strengthen your overall financial plan.

Wrapping Up

Tax planning isn’t just a year-end task; it’s something that should happen year-round. But as you get closer to your fiscal year-end, especially for operations that close on December 31, the months between September and December are the time to fine-tune your strategy and make meaningful decisions that can impact your bottom line.

As you prepare, jot down notes about any major events like droughts, storm damage, or disease losses, and bring thoughtful questions for your tax advisor. Ask about the timing of livestock or grain sales, whether to prepay expenses, or if accelerated depreciation makes sense for recent equipment purchases.

When you show up organized and informed, you gain more than a smooth tax season; you gain clarity and control. With the right records and strategy in place, you can make smarter financial decisions, minimize surprises, and focus on what really matters: growing your operation and building a business that lasts.