Tax day at our house is always an exercise in frustration and irritation. One would think that every year it would get easier, it does not! I attempt to keep receipts every year and on the big ticket items I am very good, but the little things add up and I don’t always keep them. We keep trying but it seems like a certain percentage always get lost and per Annmarie’s mantra, “no receipt, no deduction”. She is not a creative accountant type, she believes in sticking to the rules when it comes to taxes. Over the years I have come to appreciate this approach as it saves us hassle in the long run.
Before taxes can be started I have to do my part. I collate and add up all the farm income and expenses and drop it into categories every year. I started doing this years ago for the blog to track various project costs. We have learned that my projects don’t always fit into the IRS definition of a category. This causes complications when trying to do the taxes which leads to hollering from the office to downstairs, which leads to tension. Ideally, the solution to this would be to find some chore outside the house to do while taxes are being prepared. Normally, this is a solid approach but on tax day this does not work. I know some things that are essential to filling out the tax form due to my unique category building system. This caused so much angst last year that I threw out my divided binder with the “Steve” categories and wrote on the outside of a folder the needed categories. This year I broke everything out by those categories. Those essential categories according to me were: Income- Sheep, Eggs, Cows, Alpaca and Hay. Expenses- Animals, Feed, General, Equipment, Vet, Tractor/sprayer, Business Expense, Fencing, Irrigation, Alpaca.
I am told that the IRS doesn’t officially recognize my need to create categories and has their own system. Income is pretty much the same and can be gleaned from my data set. Expenses however are a little different: Animals, Truck expenses, Chemicals, Conservation Expense, Custom Hire(machine work), Depreciation, Feed, Fertilizer, Freight & Trucking, Gasoline & Fuel & Oil, Insurance, Interest on equipment loan, Rent or lease on vehicles/machinery/equipment, Repairs & Maintenance, Seeds & Plants, Supplies, Taxes, Utilities, Vet/breeding/medicine, Purchased Animals.
I have the new categories written down for next year so hopefully my summary will be more in line with what the IRS and Annmarie want. The only real problem with this is the tax laws have changed and no one is exactly sure how they are going to be reflected next year. So I am going to just keep on plowing forward and hope for the best.
So here is 2017 according to Steve for the farm. Again, we lost money, but we are starting to turn the corner. It has taken us many years to get things up to speed and develop a plan while we were doing the catch up. This fall we will plant the upper bottoms with Roundup ready Alfalfa. We will then buy our own haying equipment in the early spring. We will be putting up our own hay. We are only going to hay approximately 20 acres. We have no intention of doing any more than that. This choice to stay small has allowed us to buy equipment designed for micro farms. We are getting a hay mower, rake and a round bailer that will all work on our 25 HP tractor for around $25K brand new. One of my jobs this year will be to clean out a spot in the machine shed for them to be stored out of the weather to increase their longevity. This change should save us $5-6K in feed expenses and will allow us to sell around $3-6K in hay annually and the sell of hay could very well purchase the equipment allowing us to get “free” hay. In reality, labor is not free just because we do our own. We are confident this plan is sound and I have two of the fields ready to go and the third one is still in the works. It has some water issues that I will be working on in this summer. I am going to round up to whole numbers on the finances for ease of data manipulation so my numbers may be off by a few bucks. I did it to the penny for Annmarie.
Sheep (76 animals) $5200
Eggs (2912 collected) $792
Expenses: $16, 731
Equipment $3933 (old tractor to get running after the shop $327, flatbed trailer to get welded supports and repairs $1172, Pickup repair, new tires, new brakes and new muffler all were broken $2295, fuel for tractor 47 gallons $139)
Vet $568 (Mouse $197, Zeke $371 he had a fox tail in his ear this summer)
Tractor/Sprayer $526. (Mower repair $180, herbicide $275, insecticide $71)
Business Expense $40
Fencing $1926 (30 yards of Gravel $635, 500 wooden stays and 122 used T posts and several rolls of smooth wire and clips)
Alpaca $706 (Shearing table was all of it, I was able to shear all the animals in one day with the table. We looked at buying one but it was around $2k. It is the only way to shear more than 1 or 2 animals. This is now all stored in our barn. We are working on making connections with people to work on sorting and roving it. Annmarie will do that this summer).
Irrigation $93 (power for the pump, we didn’t use the pump much this year)
Animals $2609 ($2500 for 21 adult breeder sheep)
Barn Improvements $238 (this year I need to finish the siding and raise the walls in the momma area again, we had sheep jumping out over the walls I did not raise. I would also like to build two more wall feeders.)
Feed $5825 (Dogs $285, chickens $60 we had a bunch of food left over from last year this caused us problems due to the mice problem so we have worked on upping our cat population for rodent control instead of buying poisons, Cows $3500, Sheep $1758, Alpaca $200, Cats $22)
Total loss for 2017 $10, 739
So if we didn’t pay out $5k for feed and sold $5k worth of hay we would break even and our cows are now where they need to be as we have 10 cows and by next year they will all be bred. So that will be around $5-6k in sales. Our hope is to be profitable in 2 years. It has taken us quite a while to get here and there is definitely a learning curve to doing it. Also, it takes time to build herds and fence. If you don’t use time then you have to have a lot more cash up front.