3 Costly Tax Mistakes
Farmers May Make

It feels like the end of the year is always right around the corner…especially when it
comes to tax preparation. But year-end and the inevitable IRS filing deadlines that go
with it, wait for no one.
What are some of the most costly, but avoidable, mistakes farmers make surrounding tax
planning? According to Penn State University Extension*:

1

Farm Business Structure

In other words, not understanding the tax ramifications of how your business is organized. Reviewing your farm’s legal structure, whether it’s formed as a sole proprietorship, partnership, LLC or corporation can impact your tax obligations.

2

Timing of Income and Expenses

Alex Vasichek, Agricultural Focused Financial Planner at Elevate Financial in Fargo, concurs: “Late in their careers, retiring farmers have a tendency to store grain instead of selling it. That can expose you to unnecessary tax burdens. The same goes for going into debt to avoid certain taxes. Having a strategy on the way in AND out is critical.”

3

Lack of Depreciation Planning

Depreciation allows you to spread out the cost of pricey equipment across the life of the implements and machinery.

...having a strategy on the way in
AND out is critical.”

It’s Time to End the
Waiting Game

It’s not uncommon to wait until the last minute to organize, prepare and file our taxes. What causes us to procrastinate? Fear? Anxiety? Yes and yes. It’s human nature.

“Plus, it’s a lot of work, especially if you haven’t been keeping up with it,” says Vasichek. “Think of it as a workout or run. No matter how much you’d prefer to relax in the comfort of an easy chair, you’re relieved and grateful once it’s over.”

“The best way to avoid that anxiety is to never get there in the first place,” continues Vasichek. In other words, when you’ve been doing your due diligence every other month or so, the end of the year is just the end of another period.

Find an Experienced
“Quarterback”

No farmer or rancher wants to face tax season alone. “Having someone to help you plan takes the burden of,” encourages Vasichek. Oftentimes Elevate’s role starts out as an educational or situational one.

“Clients come to us for help with a specific issue such as a milestone in the life of the farm, or problems that arise between business partners or family members. They’re overwhelmed and not sure who to call. We listen to them to get the ball rolling for all things tax-related.”

While Agricultural Focused Financial Planners like Vasichek can be critical to a farmstead’s tax strategy, they aren’t allowed to give specific tax advice: “That’s when we work side-by-side with a client’s trusted tax professional or someone we can recommend for them. Either way, we work

closely with whoever our client designates to quarterback the process.

Vasichek, a 2024 Forbes Best-in-State Financial Security Professional**, thinks of his team as key to keeping his client’s tax strategy on track: “We’ll suggest meeting quarterly to develop a comprehensive and ongoing strategy that includes evaluating cash flow statements, income statements, balance sheets, insurance, investments and of course, tax planning.

We believe clients should feel comfortable reaching out to us directly, anytime. We are here to take their calls and calm their nerves”

“The best way to avoid that anxiety is to never get there in the first place,” continues Vasichek. In other words, when you’ve been doing your due diligence every other month or so, the end of the year is just the end of another period.

It’s Never Too Late

Even though we’re deep into 2024, the weeks following harvest are a great time to develop a snapshot of the past year. By meeting with an Agricultural Focused Financial Planner, assessing your financial situation, collaborating with a tax planning professional and implementing tax-saving strategies, you may be able to minimize your tax liability and bolster your farm’s financial stability. Not to mention, reduce your level of stress.

Alex Vasichek

Agricultural Focused Financial Planner

3 Costly Tax MistakesFarmers May Make