I have a client who recently inherited his parents farm. Actually, his dad is still living, but he's only taking a small amount of the income the farm generates. My client suddenly has a tax problem. He gets about $150K a year from the sale of his crops. All of it comes in the form of a check from the grain bin, so there aren't any taxes withheld. He's doing estimated taxes moving forward, but it doesn't help the tax issue.
Do any of you guys work with farmers like this? Can the farm incorporate itself and start a 401k? I've not dealt with farms before, so I'm not really sure where to go from here. Any suggestions?
First, he needs a CPA if the farm wasn't already working with one. Is grain his only crop? If so, that's a pretty small farm. He can operate like any other business and form an LLC, LTD, etc. The rub there is that he needs to run everything through the local FSA office to make sure his government payments are maximized.
Spiff, it's a business like any other business. I don't withhold income taxes when I pay McDonald's for a Big Mac. He needs to talk to a CPA. I'm sure you can find one or two CPA's in Missoura that have worked with farmers before.
He's got a CPA. We're going to set up a meeting between the three of us in the near future. I'm just searching for information at this point. I was thinking that maybe some of the folks on here from places like Iowa, Indiana, Kansas, or Nebraska would have a better idea of how other farmers deal with this.
And yes, I'm sure I can find a CPA or two here in MO that has worked with a farmer.
Just remember with farmers. If you spend the night and he has you share a bed with his daughter - DON'T TOUCH HER! SHE'S A CORSPE!
Sounds like a small potatoes farm.
P.S. Yes, most farm are set up as a bus and quite often are titled in a special trust to pass on to the family in a chunk and not have to be sold off to pay estate taxes, at least before 2010.