Working with a Tax Professional
Kevin Burkett, Extension Associate
Clemson University
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Introduction
Frequently a farm owner will engage a tax professional to ensure their tax returns are filed correctly. In the case of needing to find a tax professional, there are resources both from RuralTax.org and the IRS to help navigate the steps to take in finding competent professional help. There are several different credentials among preparers. It is important they have a PTIN and the correct capabilities and representation rights before the IRS to match a farm’s expectations. This article will share steps a farmer/rancher can take to get the best value from their tax professional and ensure a strong working relationship.
Things to Consider
Engagement Letter
Generally, when agreeing to work with a practitioner, an engagement letter is provided which explains what documents, access, and resources are needed. An intake form is signed with the preparer each year, and provides the timing for when all documents and records are required to be delivered. It will include what services are being provided and, typically, the charges associated with them.
Documents
One major issue is accurately and efficiently keeping records of transactions occurring with the farm business and family each year. A tax preparer is likely handling business and personal returns simultaneously; which can impact one another. The preparer will request information such as IDs, bank accounts, investment accounts, W-2s, 1098s, 1099s, K-1s, prior-year tax returns, and the accounting records for any business that is currently operating, farm or otherwise. It is important to remember that unless the information is shown to the preparer, they will not have it on hand to prepare the return(s) correctly. Consequently, this can lead to errors, and even require amending past returns if new or previously unknown information comes to light.
Separate Accounts
For the farm, having a separate business bank account where all farm financial transactions are recorded is the first step to having an accurate records system. Knowing all transactions are captured in one place means there is a running tally of what is occurring during the year. The next step is classifying the transactions into a ledger where they can be organized by date, amount, and transaction type. Typically, this is done through a chart of accounts. There are many templates for a chart of accounts; sometimes, it can come through a preparer or the recordkeeping system being used. Having your records organized in such a way allows you to drill down into specific information quickly. For instance, a question may arise “how much has been spent on fertilizer during the year?”. Ledgers can show that there has been $8,000 worth of fertilizer purchased, as there was a purchase of $4,000 in February and $4,000 in March.
Recordkeeping
The IRS specifically states that it does not require a particular system but “you can choose any recordkeeping system suited to your business that clearly shows your income and expenses” (IRS Publication 583, Starting a Business and Keeping Records). Whether it is a written account book, a spreadsheet, or formalized accounting software, if it is used consistently, it is a good system. Preparers may request or make recommendations on what type of accounting system to use. For documents that verify transactions, there should be physical or digital copies of sales and expense receipts that have been recorded in the system. This ensures there is back-up in case any questions arise from you, the preparer, or third party(s), such as the IRS. A preparer can also inform you of practical document retention policies as it relates to transactions and tax filings.
Upcoming Activties
There may be business activities that are significant, but have not actually caused a financial transaction yet. Examples include equipment trades, ownership changes, signed contracts, or even just plans for the next 12 months. These can be important items to share because it alerts the preparer of possible future issues, and to make sure items are reported correctly. An equipment purchase with delayed payments may put a depreciable asset on the books, even though nothing has impacted the bank account yet. If it seems important, it probably is, and sharing it proactively allows for better planning and correct reporting on the tax return.
Organization and Expectations
Typically, a preparer’s fee is based on the amount of time or expertise that is required to complete the return(s). From a practical standpoint, the cleaner the accounting records, the less time the preparer will spend on the engagement and the lower the charge you will receive for their services. A preparer will spend some time researching, making calculations, and filling out forms. However, the amount of prep work on the part of the preparer can be significantly reduced by the farmer/rancher. Organized records allow a preparer to spend focused time on the tax side of things, as opposed to tracking down transactions or missing information.
When working with a preparer, dates or deadlines will be agreed upon as to meeting times, receiving documents, filing deadlines, or when additional information is needed. Timely appointments throughout the year (not just come tax time) can keep the preparer informed and ensure open communication. Meeting with the preparer before year-end allows time for adjustments and tax planning, if the farm needs to do so. A public resource that may be helpful is the IRS Tax Calendar. It is a quarterly calendar that provides reminders of when items become due, payment dates, and other important information.
Conclusion
Working with a tax professional can provide significant benefit to a farming operation. The tax professional can lessen the stress and obligations a farm owner may have, freeing up the operator to focus on other necessary tasks. Working cooperatively throughout the year can provide good outcomes for both.
IRS Publications
To access IRS forms, schedules, and publications, go to www.irs.gov and type the publication, form or schedule number or title in the search box.
The following may be of particular interest:
- Choosing a tax professional
- IRS Publication 583, Starting a Business and Keeping Records
- Tax Calendar
Additional Topics
This fact sheet was written as part of Rural Tax Education, a national effort including Cooperative Extension programs at participating land-grant universities to provide income tax education materials to farmers, ranchers, and other agricultural producers. For a list of universities involved, other fact sheets, and additional information related to agricultural income tax, please see RuralTax.org.
The following may be of particular interest:
This information is intended for educational purposes only. You are encouraged to seek the advice of your tax or legal advisor, or other authoritative sources, regarding the application of these general tax principles to your individual circumstances. Pursuant to Treasury Department (IRS) Circular 230 Regulations, any federal tax advice contained here is not intended or written to be used, and may not be used, for the purpose of avoiding tax-related penalties or promoting, marketing or recommending to another party any tax-related matters addressed herein.
USDA is an equal opportunity provider, employer, and lender. Rural Tax Education is part of the National Farm Income Tax Extension Committee. The land-grant universities involved in Rural Tax Education are affirmative action/equal opportunity institutions.
This material is based upon work supported by the U.S. Department of Agriculture, under agreement number FSA21CPT0012032. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the U.S. Department of Agriculture. In addition, any reference to specific brands or types of products or services does not constitute or imply an endorsement by the U.S. Department of Agriculture for those products or services.
Revised August 2026
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