ing things to try to mitigate those losses going forward? Do you have a business plan? Do you have a separate checking account? What is the size of the losses compared to what your off-farm income is? How many hours do you spend working in the enterprise? “If they do determine that your
enterprise is not for profi t, then they limit the amount of expense de- ductions to the amount of income generated. You can’t have a loss from your enterprise that would offset other off-farm income or in- vestments.” In preparation for fi ling, Childs
says taxpayers should have all ex- penses and revenues summarized and up-to-date so they’ll know the extent of their deductions and whether they had net taxable in- come. Although in many cases it would
be in the producer’s best interest to retain a tax accountant, “they still need to educate themselves on what the IRS is going to look at. In all situations, the tax preparer is going to do their best to try to stay informed of tax laws and be in the position to best advise one of their clients along these lines. “The situation in the tax pre-
parer world is that we know there aren’t very many of us farmers and ranchers in the world, and for a tax preparer to make a living, 98 percent of the returns they prepare are going to be non-farm, so that’s where they’re going to spend their time in gaining knowledge and ex- pertise. “So farmers and ranchers need
to take it upon themselves to try to be informed and educated on what things they can do to help manage their taxable income and stay a for- profi t entity.”