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Idaho Enterprise

Tax Time? Yes, Tax Time

Apr 16, 2024 11:38AM ● By Allison Eliason

How did Benjamin Franklin say it... “In this world nothing can be said to be certain, except death and taxes?“  Unfortunately he was right and once again the taxes are due.  I say “unfortunately” not because I don’t think we shouldn’t all contribute a little to the funds that are used for the mostly civilized world we live in.  I say it simply because taxes are a rough game to play.  If only there was a prize to be had at the end of your round.  Instead of saying “pass go and collect $200” they say you should probably pay the government a little more money.

We may want to cry or curse as we battle through the frustrations of farm taxes, sorting through receipts, tallying up numbers and finding the right form.  But along the way we always find a few things that make for a good laugh and I think you will too.

The IRS defines a dependent as a “qualifying child or relative who relies on you for financial support.”  While there may be many lives, like the dogs, chickens, horses and cows that do rely on you for financial support, you cannot claim them as dependents.  The handful of dogs, dozen chickens, herd of horses, and hundreds of cows would tally up to a highly suspicious number of dependents, guaranteeing a snappy audit, hefty fee and bunk in a whole different kind of coop.

Similarly, the IRS says “anyone who performs services for you” is considered your employee.  I’m confident with that definition our horses and dogs might be considered employees, but I’m not entirely sure if that is a good thing or a bad thing.  With the way the minimum wage is going, none of us could afford to pay them a “fair wage” so we will probably just keep that one quiet.  Not to mention, where would you send a horse a 1099?

But while you can’t claim them as dependents or employees, you can at least deduct their feed costs.  Mind you, it must be categorized as “feed” and not “food.”  People eat “food” and are not farm expenses that can be deducted.  But animals eat “feed” and that is totally deductible.  Who knew that sort of a distinction would be so critical come tax season?  You turn a verb into a noun and suddenly it saves you on schedule F of your deduction tax form.

Actually, those sort of distinctions can be pretty important when it comes to your taxes.  Your accountant might be pretty confused why your operation has so many “buttons” if he doesn’t know that they really are ear tag buttons.  “Cheerios” may be what you put on the shopping list but “castration bands” should probably be what you tell your accountant.  He should understand nuts with the context clues of “nuts and bolts” but I wouldn’t separate the two.

It’s likely to take some work to get your accountant up to speed to understand ranch jargon and such, but I promise one day it will pay off.  There will come the day that he will start spouting off the difference in income from cull cows versus the calf crop and its relevance to the herd depreciation.  And it is at that moment that all the pain and suffering beforehand will finally have been worth it.

Come tax season we realize just how much our kids earn working for us as we total up the dollars spent on their activities, adventures and inevitable needs.  Claiming them as employees may be the only way we survive the sports teams, lessons, and
growth spurts.

It may have taken a few years to get the kinks worked out, but managing some sort of a ranch errand on our many grocery trips and doctor appointments has meant that all those miles on the family truck and gas receipts can finally be deducted.  And truth be told, with the mud, random items in the bed of the truck and miles on the odometer, my personal vehicle can often resemble a ranch truck.

There is a line to deduct work expenses named “work uniforms.”  I’ve always wondered if I can deduct the fancier clothes that I wear to the cattle convention on that line.  Since they are practically the same jeans I wear to work on the ranch, but just happen to be dubbed town clothes and will eventually take their turn in the saddle, I’m guessing yes.  The fancy turquoise earrings, though, I’m guessing will be a no.

There is a moment of tax season that we don’t ever giggle at, and that is when we realize just how broke we are but the IRS thinks there is plenty piled up in the equipment, herd and land.  And then they succinctly ask for a chunk back in return.  

One final word of advice- if you are good at ranching, you might not make a great accountant.  And trying to keep up on all the tax code changes from year to year in addition to understanding their bewildering myriad of forms is likely not going to fit in between calving season, branding season, haying season, weaning season, shipping, preg checking, and irrigating.  So just hire an accountant.  You can thank
me later.

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