Does Your Record Keeping Need Repairs? – Case IH | Blog
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Does Your Record Keeping Need Repairs?

A new year is the perfect time to reboot your farm’s record keeping.

If the only task you find less enjoyable than paying taxes is compiling the documents necessary to prepare your return, consider better record keeping for your farming operation. Better organization will not only help with tax preparation but also benefit your business.

As the IRS points out in Publication 225, every business must keep appropriate records. In addition to making your tax return preparations easier, good record keeping can benefit your farming operation by helping you:

  • Monitor the progress of your business
  • Prepare the financial statements necessary when working with lenders or creditors
  • Track income sources and separate farm and nonfarm receipts
  • Track deductible expenses
  • Maintain the documents needed to back up items reported on your tax return

If none of that is motivation enough, consider this: Poor farm records typically result in increased tax liability.

Your accountant or tax-return specialist likely provides a workbook or checklist to help you compile the documents and records needed to prepare your return. IRS Publication 225 provides insight into the types of records you should keep. “Understanding Your Federal Farm Income Taxes” from Penn State Extension gives an excellent overview of the basic concepts and applications of federal income tax law for farmers.

As you begin compiling documentation for your 2014 return, ask yourself if a new or upgraded record-keeping system could result in a better understanding of your business, less time spent completing the task or greater peace of mind knowing you’ve done your best to minimize your tax liability.

If you decide it’s time to make some changes, there are resources available to help you evaluate the latest software packages. Talk with your tax adviser, visit with fellow producers and spend time at winter farm shows talking to software providers. Come tax time in 2016, you’ll be glad you did.

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