Étienne Gosselin | Agronomist | Journalist
Does your farm's bottom line go up and down with prices? Thankfully, when it comes to taxes, there are plenty of ways to be creative.
With a little help from Marc-Ange Doyon, a tax specialist from UPA de la Chaudière-Appalaches, we've come up with 8 strategies to help you reduce your year-end tax bill.
1. Pay up front for goods and supplies
Consider using the cash-basis accounting methodnd pay up front for tangible supplies, like fertilizer and seed (which are often cheaper in the off-season) and intangible goods, like insurance (the premiums for which can be paid as a lump sum instead of monthly). Short on cash? Run the numbers to see if it's worth using a line of credit.
2. Put off collecting payment until next year
Ask your clients if they'd be willing to defer their payments until the new year. Waiting until the end of December to sell and deliver products so you can cash cheques or accept electronic payments in January isn't just smart, it's totally legit!
3. Buy capital assets closer to year-end
Buying equipment at the end of the year instead of the beginning means you can deduct the amortization faster. Just make sure you've got enough cash, or see if your financial institution is willing to back you for a last-minute investment.
4. Don't forget about leftover inventory
Come December, are your silos still full of corn? Anything considered purchased inventory can be deducted with the cash-basis accounting method.
5. Pay wages to family members
If you've got family working for you, pay them for their efforts! You just need to be able to show they actually did the work and got paid for it. Paying salaries once at the end of the year is also a great way to keep family members motivated and interested in the family business!
6. Contribute to an RRSP or a tax-advantaged fund
Expecting a high tax bill? Didn't make a lot of business investments this year? You have until the end of February to contribute to an RRSP or a tax-advantaged fund like those offered by Desjardins Capital régional et coopératif. The RRSP option helps reduce your taxable income, meaning a lower tax bill and makes it easier to qualify for social programs. If you go the Desjardins Capital regional and coopératif route, you'll get a fairly decent tax credit, but it won't reduce your taxable income.
7. Spread out forest revenue
Since March 2016, recognized forestry companies can spread out revenue from timber sales over an 8-year period (provincial taxes only).
8. Start planning for the sale of your business now
Plan ahead so you're ready to make the most out of your capital gain exemption. By giving this some thought a few years before you're ready to sell, you'll be able to reduce the alternative minimum tax you'll have to pay. Interested in this strategy? Speak to a tax specialist for more advice.
 Cash basis refers to a major accounting method that recognizes revenues and expenses at the time physical cash is actually received or paid out. This contrasts to the other major accounting method, accrual accounting, which recognizes income in a company's books at the time the revenue is earned, but not necessarily received, and records expenses when liabilities are incurred, but not necessarily paid. (Source: Investopedia)