By Brian E. Ravencraft, CPA, CGMA is a Principal with Holbrook & Manter, CPAs
Your farming business is constantly evolving; and with that comes changes to business practices, along with laws & regulations. Maybe it’s starting and budgeting for a new product or service, a change in ownership/succession, or an employee with an unusual payroll withholding item.
You are busy, and may decide to handle the situation the best you can to get by for now. “I’ll make a note and then ask my accountant about it at tax time. I don’t want to spend the time or money on it right now.”
Without realizing it, a year or more could pass between the time of the event in question, and meeting with us to prepare your return. In that time frame, you may have been consistently mis-handling the issue for quite a long period. Meanwhile, tax law may have changed or important deadlines may have passed which could cause penalties or prevent you from qualifying for certain opportunities. It also takes extra time (and money) to correct the issue back to the time of the initial event — if it’s possible to do so. By not addressing the issue immediately it could negatively impact relationships with clients, vendors, or employees.
Consider this hypothetical scenario. XYZ Farms met with his accountant recently to finalize their 2017 tax return. When asked for copies of W2s issued to employees, we were told the individuals were contractors, not on payroll and therefore had no taxes withheld. Further discussion with XYZ Farms determined the individuals were, in fact, employees as defined by the IRS. At this point the individuals had been misclassified for over a year, and in all likelihood, had filed their personal returns for 2017 without the proper W2.
Eventually the accountant was able to help correct the errors, but it was costly for the XYZ Farms — penalties and interest were assessed, not to mention the professional fees incurred. It created conflicts with upset employees who may have had to amend their personal returns, and incur penalties and interest of their own. At one point during the process of correcting the various issues this created, the client commented that they wondered if they were handling these individuals correctly when first bringing them on board. Had they taken a few minutes to ask our advice before heading down the wrong path, a lot of time, money, and aggravation would have been avoided. The best time to ask a question, or obtain advice, is now!
Let’s face it, things come up unexpectedly all the time, “situations” are inevitable. Being proactive in these situations and communicating with your “trusted advisor(s)” no matter how small or big the situation can provide a clear advantage. Surrounding yourself with driven, effective advisors is a proven way to help you succeed.
Accountants can play an important role as a trusted advisor, and in developing an overall business plan and monitoring of the results. Farmers can achieve their objectives to the farm and family in a more organized manner with an advisor. Also, accountants are uniquely prepared to assist farming businesses and find opportunities to improve farm efficiency and profitability.
Most farm businesses are unique. The farm workplace and financial realities on the farm intertwine with relationships and the running of the household. Accountants are prepared to be your trusted family advisor. An accountant can help the family discuss quality of life issues, values, and goals. After assessing the overall family goals, an accountant can assist in setting and monitoring priorities.
The whole process starts with building a trusted advisor relationship, in which communication and being proactive are critical attributes.
Brian E. Ravencraft, CPA, CGMA is a Principal with Holbrook & Manter, CPAs. Brian has been with Holbrook & Manter since 1995, primarily focusing on the areas of Tax Consulting and Management Advisory Services within several firm service areas, focusing on agri-business and closely held businesses and their owners. Holbrook & Manter is a professional services firm founded in 1919 and we are unique in that we offer the resources of a large firm without compromising the focused and responsive personal attention that each client deserves. You can reach Brian through www.HolbrookManter.com or at BRavencraft@HolbrookManter.com.