A farmer, like other taxpayers, must keep records to prepare an accurate income tax return and determine the correct amount of tax. This chapter explains the benefits of keeping records, what kinds of records you must keep, and how long you must keep them for federal tax purposes.
Tax records are not the only type of records you need to keep for your farming business. You should also keep records that measure your farm's financial performance. This publication only discusses tax records.
The Farm Financial Standards Council has produced a publication that provides a detailed explanation of the recommendations of the Council for financial reporting and analysis. For information on recordkeeping, you may download Financial Guidelines for Agricultural Producers at www.ffsc.org
. For more information, contact Countryside Marketing, Inc. in the following manner.
- Call 262-253-6902.
- Send a fax to 262-253-6903.
- Write to:
Farm Financial Standards Council
N78 W14573 Appleton Ave #287
Menomonee Falls, WI 53051.
You may want to see:
Publication 51 (Circular A), Agricultural Employer's Tax Guide 463 Travel, Entertainment, Gift, and Car Expenses
See chapter 16 for information about getting publications.taxmap/pubs/p225-001.htm#en_us_publink1000131397
Everyone in business, including farmers, must keep appropriate records. Recordkeeping will help you do the following.taxmap/pubs/p225-001.htm#en_us_publink1000131398
You need records to monitor the progress of your farming business. Records can show whether your business is improving, which items are selling, or what changes you need to make. Records can increase the likelihood of business success.taxmap/pubs/p225-001.htm#en_us_publink1000131399
You need records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets. These statements can help you in dealing with your bank or creditors and help you to manage your farm business.taxmap/pubs/p225-001.htm#en_us_publink1000131400
You will receive money or property from many sources. Your records can identify the source of your receipts. You need this information to separate farm from nonfarm receipts and taxable from nontaxable income.taxmap/pubs/p225-001.htm#en_us_publink1000131401
You may forget expenses when you prepare your tax return unless you record them when they occur.taxmap/pubs/p225-001.htm#en_us_publink1000131402
You need records to prepare your tax return. For example, your records must support the income, expenses, and credits you report. Generally, these are the same records you use to monitor your farming business and prepare your financial statements.taxmap/pubs/p225-001.htm#en_us_publink1000131403
You must keep your business records available at all times for inspection by the IRS. If the IRS examines any of your tax returns, you may be asked to explain the items reported. A complete set of records will speed up the examination.