Taxes and Records
Records are the key to prac
tically every decision a business
manager makes concerning the
operation of the business. Good
records are almost impossible to
evaluate in dollars. Two most
valuable uses of records are tax
planning and tax filing.
Let’s look at the use of records
for tax savings purposes. Is this
topic of interest?
Wh« Records
Let’s look at what a good record
for tax management includes.
s All of the cash expenses for
the business including such items
as postage, office supplies,
children’s wages, business dues
and advertisements, public
relations costs (example - the fire
company), work clothes, and
fringe benefits for the hired man.
These expenses should be placed
into categories so a reasonable
estimate of additional expenses
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AGRI'
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2754 Creek Hill Rd., Leo la, PA 17540
PHONE: 717-656-4151
STORE HOURS: Mon.-Fri. 7:30 to 4:30; Sat 7:30 to 11:30
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Brocken’s Ag Advice
By John E. Brockett
Farm Management Agent
Lewistown Extension Office
could be made. Example: Real
estate taxes are paid once or twice
per year so the total paid may
already be known. Feed bills are
paid throughout the year so the
final bill will be an estimate
All cash income for the
business divided into the proper
categories Regular farm income
such as the sale of milk, gram,
calves, refunds, etc is one
category. Potential long term
capital gam items is a second
category Items that may be part
ordinary income and part long
term capital gam is a third.
Depreciation a listing of all
new items with property is
essential. With that should be the
cash difference paid plus the un
depreciated balance of trade-in
items. The cash difference refers
to the amount actually paid or
contracted to be paid.
Tax Planning
Farmers can estimate taxes due
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EQUIPMENT,, NO.
* i
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I %
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by using either a ten month or
eleven month summary. The
balance of the year can then be
estimated. From there, a farmer
can use several methods to arrive
at an estimated tax figure for the
year.
The easiest way is to compare
the resultant cash income and cash
expense figures with those on the
1980 return. Then multiply the 1980
tax from line 37 on form 1040 by the
percentage figure the 1981 net cash
income is over or under the 1980
net cash mcome.
Example. Farmer A had a 1980
cash income (Schedule F & 4797) of
$70,000 and a 1980 cash expense
(Schedule F) of $40,000. His tax on
line 37 was $2,500 His 1981 cash
income (Schedule F & 4797) was
estimated at $lOO,OOO and the 1981
casn expense (Schedule 7) was
estimated at $60,000. The dif
ference in net cash income is an
increase ot 33% for 1981 over 1980
To estimate 1981 tax multiply
$2,500 by 133% to get $3,325.
A second way is to actually go
through the total tax calculation
using a 1980 tax table This way
will take three times as long to do
as the method above but would
result in a more accurate
estimated tax.
Once the 1981 estimated tax is
calculated, the taxpayer can make
AGRI
EQUIPMENT
INC.,
OFFERS
COMPLETE
• SALES
• INSTALLATION
•SERVICE
Lancaster Farming, Saturday, December 5,1981—A19
a decision as to whether to: con
tinue as he has been doing; take
action to defer taxes; or take
action to pull taxable income from
Secretary Watt
to address
PARK RIDGE, II - United
States Secretary of Interior,
James Watt, will be a featured
speaker at the 63rd annual meeting
of the American Farm Bureau
Federation in San Diego,
California in January.
Robert Delano, president of the
federation said Watt will address
the Tuesday morning general
session January 12, 1982, in San
Diego s Sports Arena
Prior to being named to his
present post, Watt was president
and chief legal officer for the
Mountain States Legal Foun
dation A non-profit public interest
law center, the foundation is
“dedicated to bringing balance to
the courts in defense of individual
liberty and private enterprise ”
Upon graduation from the
University of Wyoming, where he
received a Bachelor’s degree from
the College of Commerce and
Industry and his J.D. degree from
the College of Law, Watt worked as
personal assistant to Milward
Simpson m his successful cam
paign for the U S. Senate in 1962.
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a future year into the 1981 tax year.
Tax management should consider
taxes for the future as well as for
the present.
convention
Then, until 1966, he was the former
Wyoming Senator’s legislative
assistant and counsel
From 1966 to 1969 he served as
secretary to the Natural Resources
Committee and the Environmental
Pollution Advisory Panel of the
U S Chamber of Commerce
Watt’s service to the department
of Interior began in 1969, first as
special assistant to tne Secretary,
then as Deputy Assistant
Secretary and from 1972 until 1975
he was director of the Bureau of
Outdoor Recreation He then
served as commissioner and later
vice chairman of the Federal
Power Commission until joining
the Mountain States Legal
Foundation
Also on the program of the
Tuesday general session will be
Senator Walter Huddleston of
Kentucky, ranking minority
member of the Senate Agriculture
Committee About 8,000
representatives of AFBF’s three
million member families are
expected to attend the January 10
to 14 meeting.