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The Management Calendar
Farm Business Management Update, October/November 2004
By Gordon Groover, Virginia Cooperative Extension, Farm Business Management, VT
Last year we were concerned about hurricane Isabel (some still are), now parts of the state are dealing with devastating effects of Gaston and Jeanne. Listed below are selective disaster information and web sites at USDA that maybe helpful. The main USDA Disaster Assistance Program site is http://disaster.fsa.usda.gov/fsa.asp. This site has information for both the national level and specific programs. It may not have all the details about program implementation, but it will be useful for informing farmers about eligibility, where to apply, and deadlines. Local FSA offices may not have the details about programs when press releases are posted to this site. Local FSA offices do not get information until all procedures are in place to accept applications for a specific program. The main Virginia resource for clearing information on state disaster services and information is the Virginia Department of Emergency Management (VDEM): the main web site is http://www.vaemergency.com/index.cfm.
Natural disasters often result in losses that have tax implications. Guido van der Hoeven,
Extension Specialist in the Department of Agricultural and Resource Economics at NC State University has an excellent article addressing this issue. The article is titled "Casualty Loss Deductions for Tax Purposes" and can be found at his web site: http://www.ag-econ.ncsu.edu/faculty/vanderhoeven/guido.htm.
Farm business managers should consider putting the following activities on their management calendar for October-November.
- Once the crops are harvested, get the farm financial records summarized, updating the third quarter cash flow and comparing them to your projections. Watch for problems. Actual inflows or outflows that differ from your projections may not signal a problem, but understanding why there are differences helps you understand changes in the farm business.
- Using the last three quarters of cash flow and financial records, estimate total farm expenses, income, and capital purchases and sales. Then make an appointment with your tax advisor to plan year-end tax management strategies. Be sure to estimate crop insurance payments and any government payments that will appear on this year's taxes. To take full advantage of year-end tax management strategies, farmers must make decisions before December 31, 2004. Be sure to review changes to state and federal tax laws with your tax advisor to make sure you have not missed deductions and/or credits.
- Farm business managers should never loose sight of the two objectives of tax management: 1) all decisions, including tax management, should be make to improve the long-term survivable and profitability of the businesses, and 2) tax management tools are used to level out the year-to-year swings in reported income and subsequent taxes paid. You can use the multitude of tools and techniques written into the tax code for farmers and all businesses to manage income and expenses to even out the wide swings in annual profits and losses that many farmers experience. Leveling out the income tax liabilities year-to-year will lead to lower total taxes being paid.
- Be sure to keep crop records up-to-date during harvest; include yields, machine times and equipment used, weed problems, and differences in hybrids. If you're moving up in the information age, consider the fully integrated record keeping systems using yield monitors, GPS, handheld computers, and management software on your office computer. One example of this whole farm system (includes accounting, personnel, and livestock records add-ons) is FarmWorks at http://www.farmworks.com.
- Be sure to keep livestock records up-to-date during fall sales. At a minimum, include weight, grade, sale prices, and identification numbers of all calves sold and/or purchased.
- Be sure to check on crop insurance policies. A list on agents in your area can be found at the following site: http://www3.rma.usda.gov/apps/agents/. Check the following web site for closing dates for all insurance policies: http://www.rma.usda.gov/data/sales-closing-dates/
- Agriculture Secretary Ann M. Veneman announced October 1, 2004 that sign-up for the 2005 Direct and Counter-cyclical Payment Program (DCP) begins at USDA Service Centers and that producers can also enroll online starting October 20, 2004. Note: Producers must sign contracts annually under the DCP. Contact your local FSA office for additional details and signup procedures. Local offices can be found at: http://oip.usda.gov/scripts/ndisapi.dll/oip_agency/index?state=va&agency=fsa.
Other useful information for farmers and professionals:
- Farmers interested in producing products and/or service that are marketed directly to consumers, often referred to as "Value-added" should take a look at the article titled "What I've learned about value-added" by Melvin Brees, co-director, Missouri Value-Added Development Center. Find the article at: http://www.extension.iastate.edu/agdm/articles/others/BreJun04.html.
- As many farmers expand their business with family labor or with employees, conflict can occur around how best to manage or deliver production. A short and informative article Using Group Conflict to Improve your Project by Mary Holz-Clause, Co-Director, Ag Marketing Resource Center, Iowa State University can be found at http://www.extension.iastate.edu/agdm/wholefarm/html/c6-55.html.
Virginia Cooperative Extension