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  #1  
Old 11-23-2017, 09:17 AM
Rick Rick is offline
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Default Tax Ramifications?

Hey,

What are some of my options wrt taxes? I have kind of a hobby farm thing going; I am just putting in infrastructure now (shop, barn, fencing, trees and vines).

Mostly I am interested in how to set the farm up as a business and be able to write off expenses. My plans are to sell farm products (vegetables, eggs, fruit, etc) once the place is more set up.

Thanks

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  #2  
Old 11-23-2017, 10:43 AM
Setanta Male Setanta is offline
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depends on the state you are in

in ny there are 2 options, the first is the business route, you will just carry a business id card and present it whenever you buy stuff showing its tax exempt, and you have to file your income taxes as self employed. I know a few people who do this, but they also have to report quarterly earnings on their farm, all the paperwork they file doesn't seem to be worth what they save on a little sales tax.

also if your land is part of an ag district you can get steep reductions on property taxes, and several exemptions to activities and regulations, but you have to be able to show you made at least $10,000 a year for the past 3 years, and the tax reductions will be based on an assessors survey of what your farm is able to make verses what you actually make. my farm doesn't make enough on paper to qualify (especially since I barter a lot, my area has apaling unemployment and poverty rates and nobody has any money, so I frequently trade stuff for other stuff).

the third and simplest tax reduction I know of are self signed forms you can get from the county ag office. these are on time forms (can be kept on file with busninesses so they don't need a new copy each time), the form is a declaration that what you buy if for agricultural purposes, the business does not charge you sales tax and they file the form when they submit their tax info records to the state (their quarterly reports). the state can issue an audit to track you down on the form to "prove" what you bought was for agriculture, but they almost never do (file the form when buying a new big screen tv and they will send an auditor to verify how its ag related, but if your buying feed, seed, tools, building materials, work vehicles like an atv or a tractor, they just take your word for it). you can buy an atv with such a a form and the form is legitimate as long at the atv (or whatever tool or equipment you buy) will be used at least 50% of the time for ag purposes. so if you bought an atv to use to move a trailer of feed around, move fertilizer and gather apples, or whatever, but you also use it to ride around for fun in a pasture sometimes its still a farm purchase and tax exempt. personally I use these forms whenever I go to make a purchase over $200. people with business cards use the exemption on stuff as low as $2, but I think its a waste of effort unless your farm is huge and raking in huge amounts of sales since you also have to file quarterly earnings. my own farm doesn't make enough to qualify for tax reductions via ag assessment, and I don't make enough to bother with a business lisence (there are other considerations to make with a business, such as consumer protection laws, a residence under a state or local threshold cannot be seized in a civil suit only subject to a lein, while a business is not protected the same way, if your not going to have business insurances then you might be better off as a homestead making stuff for your own use, selling the surplus and just filing the extra income on your taxes every spring, if you donate to local charities and get receipts you can often negate the extra income (I sometimes donate firewood to a local non profit organization).

that's the basic run down of what I know of farm tax stuff, but most of that is for ny state only, each state runs things a little differently and the only way to know for sure is to contact your county ag office. the only taxes run by the feds and applicable to everyone are income taxes every spring by the irs, everything else is state, or county or township managed.
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Old 11-24-2017, 08:58 AM
doc doc is offline
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Good run-down, Setanta.

I can add this-- you can't deduct start up costs on your Fed return until you're actually "in business," ie- selling stuff. If you spend money on equipment this year, then you must sell harvest this year to get the deduction.

You also must show a profit 3 out of 5 yrs or they class your activity as hobby-- no deductions.

For the Feds, you file Form F with your 1040 if you're just a solo farm. Assuming you have a job for your main source of income, your farm losses are subtracted from your salary as far as Fed Income Tax is calculated, but your Soc Sec & Medicare payroll tax is based on your full outside salary.
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  #4  
Old 11-24-2017, 03:44 PM
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Tim Horton Male Tim Horton is offline
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One detail I can add that may be worthwhile.
Both CA and US tax codes have what is nicknamed
"Substance opposed to form" rules.

Meaning.... Regardless how you set things up on paper, if you operate on a daily basis differently, they will invoke this rule and call everything you buy or do as income. Lots of loop holes here for them to use and you will end up in a jam most likely.
====
Story with information.
A guy I worked with once wanted to start a side line repair business of some kind. His accountant told him two facts.

1.. Don't start anything that you have to make work to make a payment on a piece of equipment, property etc.

2.. Either go the full paperwork route and start a business and keep immaculate records of expenses and earnings that only the accountant sees. Or keep the side line "off the books" but keep immaculate records of expenses and earnings that only the accountant sees.
--
I never heard how this turned out in the end.
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  #5  
Old 11-28-2017, 07:58 PM
blackpowderbill Male blackpowderbill is offline
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Wink tax card ID

Man I had a business in New Yorkisstan for 30 years and never had a Tax ID card. I had to bring in a resale form filled out to each business.

Maybe I should move back now that it's better.....LMAO yea when Cuomo goes to jail I will.

IMO a small hobby farm starting out I'd not jump into all the filing and claiming until it looked like a substantial profit was going to be made. My best advice is to find a good tax accountant.

You better be careful here in GA they charge you ad valorem tax on every item used or not sold in the business. Yea really, I pay tax on my Dad's desk that was made for him in like 1947 when he was 15.
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  #6  
Old 12-02-2017, 11:24 PM
Doninalaska Doninalaska is online now
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Yep, I would see a tax pro for advice on your own situation. Here, we need state and borough business licenses. We don't (yet) have a sales tax here, so that is not a problem. You DO need to show profit as Doc says, to show that you are serious. It also helps to have a separate bank account to track all your income and expenses through. See what your tax advisor says, but don't trust a bank--they give bad advice and folks believe 'em since they handle money. CPAs work, and most tax services that have an Enrolled Agent on staff work, too, and they are cheaper than CPAs, especially when you don't have the income yet.
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  #7  
Old 12-03-2017, 07:22 AM
doc doc is offline
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consult a CPA??? ...What's a Car Parking Attendant gunna know about it?
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