Be careful with your tax management

[farmers_son]

Ah, yes. But the challenge is how do you pay as little tax as possible and at the same time get as much of those tax dollars as you can from CAIS. Sometimes when you are wiggling around to not pay tax you are backing yourself into a corner where you will eventually get hit with a very big tax bill, usually when you can least afford it.

We used to hire an accountant to do our tax and give us advice. A couple of very bad incidents and I found out the hard way the accountants will offer advice and charge for that advice when they are not knowledgeable in the area. I now do all my own tax and my own CAIS and I am much more knowledgeable as a result. I really like the comfort I get from knowing what is going on. We used to sign those tax forms without really even knowing what was in them.

A new thing that is out there we need to be aware of is GAAR. No, not Grrr... GAAR stands for General Anti-Avoidance Rule. GAAR is new and its purpose is to grab those who exactly follow the tax laws but are really doing too good of a job of reducing their taxes.

[lakenheath]

Binser,

Your points are well taken. Seems you take care of your farm clients very well.

In the end it really comes down to the individual tax situation in every case. I inform my clients about the pro and cons of different tax planning stragies and go from there.

One thing we must keep in mind also is the potential for lower tax rates in futures years. Our governments seem to be hinting about lower tax down the road, and if we can safely and carefully defer some of our clients taxable income into those year we will realize real tax savings plus take advantage of the time value of money.

That being said, paying a small amount of tax each year in the lower brackets is not poor tax planning at all. It is safe and conservative cashflow planning and it will help prevent some farmers from going into the debt cycle who may not have the best money management skills.

It's interestng how many clients are so upset with the governments wasteful spending that they will opt to pay zero tax in the current, knowing that they may have to pay it down the road. I have no problem with that, as long as they are informed and know all the implications.

Personally on my farm, I pre-pay and deferr. I use the the MAA0 to off-set any effect that this has on CAIS (strickly a grain farmer) and once the pre-pay/deferr cycle catches up with me I will roll my operation into a corporation and pay tax at 18%. I realize this works for me for not for everybody, but I did enjoy not paying tax to our wonderful Liberal government!