Should records for filing taxes be kept on the ranch, farm?
BROOKINGS, S.D. - With the March 3, 2017 tax deadline looming for South Dakota's farmers and ranchers, there is no time to waste in gathering the important information and documents Uncle Sam requires.
"While most people must file taxes by April 15, 2017, farmers' and ranchers' tax deadline is more than a month earlier. In general, the law does not require any specific record-keeping system, with a few exceptions, a producer can choose any kind of record keeping system they wish to use for their business," explained Jack Davis, SDSU Extension Crops Business Management Field Specialist.
Davis listed off several system options producers can choose from, including: Quicken, QuickBooks, Easy Farm, paper ledger, paper journal etc.
Record Keeping Options to Consider
"Although the Internal Revenue Service (IRS) and the Farm Financial Standards Council encourages an accrual accounting method for record keeping, producers however can also use cash," Davis said.
The record keeping system a producer selects should include a summary of all business transactions.
"It is imperative producers also keep supporting documents such as purchases, sales, payroll, invoices and other transactions taking place in their business," explained Shannon Sand, SDSU Extension Livestock Business Management Field Specialist. "It is important to keep these documents because they support the entries listed in journals, ledgers and tax returns."
Sand added that producers need to keep these records for three years from when the tax return was filed - however, some records may need to be kept longer.
Davis and Sand both said there are benefits to keeping records beyond taxes. For example, accurate records provide producers with a way to monitor the progress of their business.
"Records show whether the business is improving, which items are profitable and what may need to be changed," Sand said. "Records also help producers keep track of deductible expenses, as there may be many throughout the year. If you simply try to recount them all at tax prep time, it may be quite might be difficult."
Good record keeping makes preparing tax returns easier and supports items reported on tax returns.
For more tax preparation and record keeping information, visit this link at iGrow.org: http://igrow.org/livestock/profit-tips/importance-of-keeping-records-for...
The information in this article is believed to be reliable and correct. However, no guarantee or warranty is provided for its accuracy or completeness. This information is provided exclusively for educational purposes and any action or inaction or decisions made as the result of reading this material is solely the responsibility of readers. The author(s) and South Dakota State University disclaim any responsibility for loss associated with the use of this information.