While most citizens must file taxes by April 16, 2018, farmers’ and ranchers’ taxes must be filed by March 1, 2018. Due to the filing deadline many producers are beginning the process of gathering their important paperwork.
“In general, the law does not require any specific kinds of records (there are a few exceptions though) and a producer can choose any kind of recordkeeping system they wish to use for their business,” explained Shannon Sand, South Dakota State University (SDSU) Extension livestock business management field specialist.
Even though there is flexibility, Sand stressed the importance of maintaining a thorough recordkeeping system. The system needs to include a summary of all business transactions and supporting documents.
“Good recordkeeping makes preparing tax returns easier and supports items reported on tax returns,” Sand said. “It is imperative producers also keep supporting documents such as purchases, sales, payroll, invoices and other transactions taking place in the business.”
She added that it is important to keep these documents because they support the entries listed in journals, ledgers and tax returns.
Remember, most records and supporting documents need to be kept on hand for three years from when the tax return was filed. However, some records may need to be kept longer.
Beyond tax season
Sand said that in addition to taxes there are added benefits to maintaining accurate records.
“Keeping accurate records allows producers to monitor the progress of their business, and show whether it is improving, which items are profitable, and what may need to change,” she said.
Records also help producers keep track of deductible expenses, as there may be many throughout the year, and trying to remember them all might be difficult.
More information about keeping records for filing taxes on the farm/ranch is available online from the Internal Revenue Service, www.irs.gov/pub/irs-pdf/p225.pdf. — SDSU
