WIS197 FARM BUSINESS INCOME AND EXPENSE RECORDS 02/26/1990 07:53 AM D1 298 Lines Agriculture Marketing/Distribution and Retail Services Farm Business Income and Expense Records (45-90 days) This unit deals with farm income and expense records. Topics include career opportunities and employment information, types of farm records, terminology, farm record forms, tax forms, and advantages of proper farm records. Objectives To acquaint students with employment information and career opportunities in farm recordkeeping To have students recognize the importance of yearly tax records and accuracy with all farm records To instruct students in the use of recordkeeping books To provide opportunities for students to use farm account and financial record books in developing monthly cash flows, family living budgets, and farm filing systems To differentiate between capital income and capital expense Competencies At the conclusion of this unit, students will be able to explain current employment information such as job description, job availability, personal and educational requirements, opportunity for advancement, and other factors relative to potential employment in farm recordkeeping and relate it to their personal needs and aspirations; understand the need for and importance of accuracy in keeping farm records; utilize farm tax forms and record books; enter and balance farm income and expenses in the farm record book; calculate monthly cash flow and family living expenses; complete the labor forms and year-end farm records for income tax purposes; explain the difference between capital income and expenses; and develop a farm filing system and understand debt repayment. Subject Matter (Basic skills integration areas are shown in brackets following title.) Careers - Current and future employment needs - Job descriptions - Training requirements - Working conditions - Opportunities for advancement - Other factors Federal tax forms and schedules used for farm records - 1040 - Federal Tax Form - Schedule A - Itemized Deductions and Schedule B - Interest Income - 1040-D - Capital Schedule - 1040-E - Rental Schedule - 1040-F - Farm Schedule - 1040-SE - Social Security Schedule - 1040-3468 - Investment Credit Schedule - 1040-3800 - General Business Credit - 1040-4136 - Gas Tax Credit Schedule - 1040-4255 - Recapture of Investment Credit Schedule - 1040-4562 - Depreciation - 1040-4797 - Gains and Losses of Exchanges of Capital Items Types of farm records [Mathematics] - Income records Purchased "Held for Resale" items Sale of capital items Milk income Other operating income (hay, calves, crops, etc.) Government payments Accounts receivable - Expense records Capital purchases Futures accounts Labor costs Farm operating expenses Special expenses (1099s, etc.) Monthly livestock inventory check Annual livestock inventory check - Credit records Farm credit record Credit summary Accounts payable - Family living records Nonfarm personal credit record Family living expenses Nonfarm wage income Record of investment income (nonfarm) Nonfarm business (income and expenses) Nonfarm capital sales Farm produce used in home Family savings, investment, and cash summary - Miscellaneous records Silo capacities Monthly cash balance Accuracy check Cash flow plan and record Income tax projection worksheet Annual crop production summary Monthly feed use worksheet - Farm record terminology Capital assets Short-term capital assets Long-term capital assets Business capital assets Depreciable capital assets Nondepreciable capital assets Cost basis Adjusted tax basis Personal property Personal real estate Farm personal property Farm real estate property Required farm records [Mathematics] - Income information - Expense information - Depreciation records - Capital gains or losses - Investment credit records - Employee compensation records - Bank statements and records - Income and expense receipts Federal tax form storage - Income or tax deduction records - three years after due date of tax return - Employment tax returns - four years after due date of employment tax return - Capital assets or improvement records - indefinitely, or at least as long as four years after the final disposition and payment for final disposition of the asset is made Advantages of proper farm records [Social Studies] - Assures full amount of legal deductions - Enables computation of depreciation allowances - Enables computation of investment credit - Enables computation of capital gains and losses - Identifies the sources of business cash and property received - Tax return audit assistance - Enables effective tax management - Peace of mind Motivational Activities Invite a local farmer to give a firsthand account on the importance of keeping complete, accurate records. Provide examples of farm record books. Demonstrate the computer software programs available for farm recordkeeping. Invite an Internal Revenue Service representative to discuss audits. View films, videotapes, and slides on unit-related topics. Learning Activities Develop a farm account book. Fill in a farm account book. Prepare records for a tax consultant. Develop a partial budget. Develop a complete budget. Develop a cash flow budget. Develop a family living budget. Develop a farm filing system. Complete a labor summary for tax reports. Instructional Materials Textbooks and References Doane's Facts and Figures for Farmers. 4th ed. Bloomington, MN: Doane Information Services, 1981. Available from Nasco. Farm Accounting and Business Analysis by Sydney C. James and Everett Stoneberg. 3rd ed. Ames, Iowa: Iowa State University Press, 1986. Financial Management in Agriculture by Peter J. Barry and C.B. Baker. 3rd ed. Danville, IL: Interstate, 1983. Managing Your Financial Future: Farm and Family Records by R.A. Luening. Book one. 4th ed. Richland Center, WI: Richland Observer, 1987. Bulletins and Pamphlets The following are available from the Cooperative Extension Service. Equalized Value, Assessed Value and Your Property Tax Bill. G3365. The Farm Corporation: What It Is - How It Works - How It Is Taxed. NCR11. Farm Records Example. A7801211. Federal Income Tax Incentives for Conservation and Pollution Control Practices. A7790409. How Do Income, Estate, and Gift Tax Policies Affect Structure A9N6T143. How Federal Income Tax Rules Affect Ownership and Control of Farming. NCR37. Income Tax Management for Farmers. NCR2. The following is available from the Internal Revenue Service. Your Federal Income Tax. Annual publication. The following is available from Doane Agricultural Service, Inc. Tax Management Guide The following is available from the United States Department of Agriculture. Agricultural Outlook Charts. A-55. Annual publication. Periodicals Crops and Soils Doane's Agricultural Report Drovers Journal Farm Journal Successful Farming Wisconsin Agriculturalist Computer Software The following is available from Hobar Publications. 4 Farm Profit. IBM. On-line Computer Networks The following are available from Ag Ed Network, AgriData Resources, Inc. Blank Cash-flow Sheet: Livestock. FE2700. Calculating Interest Payments. HS22. Computers for Farm Accounting. HS59. Computers to Keep Dairy Records. HS215. Determining Cash Flow. HS43. Determining Depreciation. HS41. Laboratory Resources The following is available from the Internal Revenue Service. Understanding Taxes - Student Workbook Films, Videotapes, and Slides The following is available from the Bureau of Audio Visual Instruction. Farm Records: The Net Worth Statement. 11342 (VHS videotape, color, 35 minutes). University of Wisconsin, Department of Agricultural Journalism, 1984. The following is available from Doane Agricultural Service, Inc. Increasing Earnings through Farm Records. (Filmstrip.) The following is available from the Grange Farm Film Foundation. In Pursuit of Excellence - Agricultural Excellence. (16mm film, color, 13 minutes.) Equipment and Facilities Student calculators Computer/printer