Financial Planning
Last month Statistics Canada released the results of the 2016 Census of Agriculture. Like many of you, I was eager to read up on the results and discover how our industry has changed in the five years since the last survey was conducted. 
Published in News

December 4, 2014 - Canada shares the North American continent with the United States, so the climate and ecological effects there have the potential to be felt here at home. It's with this in mind that a new government forecast from the U.S. may be concerning for Canada's farmers.

According to the U.S. Government Accountability Office (GAO), the long-term effects of climate change have the potential to substantially increase losses to crop insurance programs over the next several decades.

GAO revealed that losses for the programs tracing back to 2008 increased by 8 per cent due in part to population growth and appreciation in property prices for regions at risk of flooding. Furthermore, come 2040, climate change has the potential to increases losses even more, perhaps over 100 per cent by 2100.

Colorado Sen. Michael Bennet, chairman of the U.S. Agriculture Subcommittee on Conservation, Forestry and Natural Resources, requested the analysis to be done and remarked how the world can no longer tolerate dithering on climate change's devastating effects.

"It is yet another example of the expense that's caused by our failing to deal with climate change," said Bennett, according to USA Today.

Additionally, after analyzing 20 scientific studies on climate change, the report revealed there could be an uptick in hurricane losses of between 14 per cent and 47 per cent from 2000 to 2040. Losses could be even more significant further out, rising to as much as between 54 per cent and 110 per cent between 2040 and 2100.

Odds of Flooding May Rise
The GAO study also referenced how climate change could lead to an increased prevalence of flooding, which is the No. 1 natural disaster in the U.S.

Flooding has proven to be problematic over the last couple of years in Canada. Manitoba and Saskatchewan both saw severe flood damage this year. Many farmlands were destroyed and an estimated 100,000 people were displaced, according to provincial data records.

Crop insurance is an important protection farmers should have to provide financial cover for themselves when weather doesn't cooperate. With the appropriate documentation, farmers can make a claim if sales numbers are adversely affected by crop damage. Growers who receive insurance proceeds need to remember that this is considered earnings, so during tax season, it should be reported as farm income.

FBC is Canada’s Farm & Small Business Tax Specialist, providing tax accounting and bookkeeping services to over 20,000 farms and small businesses from Ontario to British Columbia. Our complete financial planning for farm and small business owners takes a long-term approach to address your specific needs at all stages of life and business, minimizing your taxes year after year. Year-round services include tax planning, tax optimization, business consulting and audit protection.

For more information, visit www.fbc.ca

Published in Business Management

December 4, 2014 - In Canada, all farmers must report their net income by year's end. When you report your farming income, you’ll have to track earnings for the entire fiscal period. While the exact timeline can vary - new or recently closed businesses will have slightly different fiscal periods - for the most part self-employed individuals' fiscal period ends on December 31.

For existing farm businesses, the term will typically span 12 months. This means that the months are winding down, and soon you’ll have to report your farming income.

Using the Form T2042
The Canada Revenue Agency designed a form to assist farmers with reporting their income. The Form T2042, or a Statement of Farming Activities, was put together in order to assist individuals with adding up their income and expenses for the year, to assist with income tax preparation. One of these forms, or another type of financial statement, will be required for each business that you run.

The identification section of the form is self-explanatory, though there are a few details you'll need to remember. You’ll need to include your program account number, assigned by the CRA, the fiscal period covered and your industry code. The CRA provides a list defining the codes for each farming sub-sector.

CRA states that if a single activity makes up 50 per cent of your farming business or more, then that should be the code you list on the Form T2042. For example, if 60 per cent of your business involves hog and pig farming, then you write '112210' in the industry code section. There are also combination industry codes, should no one activity make up more than 50 per cent of your business.

Following the identification section, the Form T2042 includes a box that allows you to track Internet-based earnings. This section simply requires you to state income from the Internet, and the websites on which transactions took place. You’ll also have to identify the percentage of your income derived from Internet activities.
The next section will require a statement of farming income. Every possible source of earnings from wheat sales to rebates is listed in this section of the Form T2042. When you have listed all revenue sources, you’ll have to add your gross income to the section - or how much money you made without taking into account expenses.

The expenses section of the form comes after the income box. Make sure that you separate your expense types into two categories - current and capital.

  • Capital expenses provide long lasting benefits and extend the life of your property.
  • Current expenses will bring property back to original condition, but won't actually improve it.

Finally there will be a section for net income or loss, a combination of income and expenses during the fiscal period.
Using the Form T2042 in order to break down income and expenses makes the process easier.

FBC is Canada’s Farm & Small Business Tax Specialist, providing tax accounting and bookkeeping services to over 20,000 farms and small businesses from Ontario to British Columbia. Our complete financial planning for farm and small business owners takes a long-term approach to address your specific needs at all stages of life and business, minimizing your taxes year after year. Year-round services include tax planning, tax optimization, business consulting and audit protection.

For more information, visit www.fbc.ca

Published in Business Management

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