MSU Extension MI Ag Ideas to Grow With

 Welcome everyone. My name is Florence Colella and I am an extension educator with Michigan State University Extension. Let's dive right into this presentation about financial record keeping 101. Record keeping is the art of managing an organization's financial information throughout its life cycle from the time of creation to its eventual disposition. The chart of accounts is a list of all the accounts in your record keeping system. It should reflect the transactions that need to be tracked on your farm. When choosing account names, it may be useful to look at the IRS Schedule F, which is used to report farm income and expenses for income tax purposes. If the chart of accounts contains the same names as the Schedule F, It makes it easy to transfer amounts from the accounting system to the Schedule F at the end of the year. Having a good chart of accounts is the key to happiness in any record keeping system you choose. a note on that is that MSU has the telfarm program, which is a paid service that gives you a standard chart of accounts for you to use. Using this chart of accounts makes it really easy to get a standard analysis of your business at the end of the year with assistance from a foreign business management educator. Since many farms are enrolled in the program, all with the same chart of accounts, we have the ability to benchmark your farms financial performance with other similar Farms. Thus, we can compare your results with the average results and get an idea of where your farm is at with respect to everyone else. The telfarm farm program also will review your books and back them up throughout the year. And they can do a year-end tax plan for you. There are plenty of good options to build up your records for is from simple to portable, to powerful. So here is a quick overview. There are paper options, for example, this is the picture of the farm records book, which you can buy from the MSU online bookstore or your local extension office. Paper systems are cheap and easy, but they make it hard to extract useful information and that's hard to copy them or access them outside of the Farms office. There's applications you can download on your phone. Here's a few examples of free ones, mens wave and social, Apps are portable, but they have a learning curve and you are subjected to their continued availability in your phones store. You also have to have a smart phone to use them. There's websites which some are free, but here we have an example of a very popular paid one. Quickbooks, online. Websites are portable and you can access them from any device connected to the Internet. A drawback of website is that they are not as powerful as softwares are. and here's spreadsheets. Some spreadsheet softwares are free like Google Sheets, and some are paid like Microsoft Excel. Spreadsheets have a learning curve and they are subject to user error to some degree. They also are not able to handle large amounts of data, like softwares are. Here's a few examples of free recordkeeping spreadsheet, templates of different kinds. And finally, there are computer softwares which are always paid. This is a picture of PC Mars, which is an accounting software designed specifically for farms. Software can be installed in one or two computers and you're subject to availability and price variations, but they are powerful. And then there's combinations. Most apps will usually have a website too, for example. Some of these options have the ability to export into spreadsheets as well. So if you want to personalize reports a bit, you can do that. There are some really cool things out there. Like some can store receipts. You take a picture and they will create your journal entries automatically through a text recognition. So your records will be great or terrible depending on the time that you invest in learning the system. And it does not really have to do with that complexity or the price of the record keeping system that you choose. Any system you decide to use will have a learning curve, so make time to learn. And another thing you should consider is using a competence accountants and discussing your options with them before making any decisions. If you're a farmer gets audited by the IRS, they will want to see, apart from your books, the receipts that supports the information entered in your books, among other things. So you need to try to have a receipt to archival method in place. Some some people put everything on paper, receipts, notes, et cetera. And they move it into an archive drawer or accordion breadth accordion binder by category once transactions are entered in the record keeping system, others use it digital. Receive archival and note-taking system with a folder structure by account. Some cell phone applications that can be used to capture snaps are of receipts and saved them. Two folders are Google Photos, Google Drive, OneDrive into Office Lens, and there are many other scanning apps. Just make sure to keep receipts separate from your other photos. If you choose to use an electronic receipt storage system, you may destroy the original hard copies. Just remember to include copies of receipts from online purchases in your digital folders and make notes of anything that you don't have a receipt for that goes for both paper and digital systems. Whether you're a paper person or a digital nerd, please know the difference between an invoice and a receipt. If you keep invoices, that's fine. But if you do that, either keep them totally separate from your receipts or attach a receipt to each invoice once paid as invoices by themselves do not serve as proof of payment. Also, remember that bank reconciliation is needed to ensure that your checking account balance is correct. Reconciling is a process that involves comparing some external source of information with your own. The purpose of doing so is to locate any differences between the two versions and to spot and correct any errors either made by the other party or you. The process will usually involve two lists of transactions and a way to check or cross off records that match up. We need to do this because we still have human inputs that can cost mishaps. Errors happen, checks got lost in the mail, online, orders disappear and unexpected bank fee, a wire transfer that did not get completed, checks that are outstanding and need to be addressed, et cetera. Okay. So we had said that your chart of accounts should make it easy to transfer information from your record keeping system to Schedule F. We will now go over a few considerations to help understand what type of account you need to be collecting. We will first make a few useful notes for any beginning farmers out there. If you have not yet, you will have to register your business name with the county clerk's office. You have to select. Okay. There you have to select. What kind of entity are going to be. The most common business entity is sole proprietor. And then you can have partnerships, LLCs, some small business corporations, or a Subchapter S. Some bigger corporations like subchapter C, silent partners, et cetera. That's a legal decision, but it has tax implications as it's going to determine how the business is going to be taxed. If you form a corporation, profits will be taxed at both at the business level and at the individual level. But there's no tax at the business level for a sole proprietor or a partnership, a limited liability company, or an S Corp. The entity is not taxed. The individual is taxed. The farm partnership, fills out a form, the Schedule F. And then there's a special series of forums where the partnership profit is sent out to each of the partners. And the partners claim their share of partnership profits on their individual tax return. They paid themselves the tax individually. That's why these are called pass-through entities. So then you need to decide how you will file taxes. First, there's the decision of whether you're running a hobby or a commercial farm the Internal Revenue Service defines a farmer as someone who cultivates, operates, or manages the farm for profit, either as owner or tenant. One thing that is tricky is that a farm is defined differently for income taxes, for property taxes, for the USDA, et cetera. So make sure to follow the right definition. There are no minimum income amounts to be considered a farmer by the IRS. Any income from my hobby farm is reported on the first page of the US individual income tax return or a Form 1040 under other income and it is all taxable. You used to be able to deduct hobby farm expenses to the extent of the hobby farms income. But that's not the case anymore. So you will be taxed on your hobby farms gross income independently from any expense that you incur. On the other hand, income from a commercial farm is reported on Schedule F as an attachment to form 1040 and its expenses are deductible even if they go above income. So if your commercial farm operates at a loss in some years, those losses can be used to offset your overall income tax liability. The IRS will presume farming activity is being conducted for profit if it produced a profit in at least three out of five years, including the current one. Equine operations are the exception with a presumption of profits in at least two out of seven years. If this test is not met, the IRS will consider other criteria that specified there in the slide. If you are audited, the IRS will look at whether you can prove that your goal is to make money from farming. The good news is that the practices needed to show the IRS that you are in farming for its potential profit, even if you are not making money right now, are the same good practices that will eventually make your business a  successful one. So this is a list of things that the IRS will look at. Keep your farms bank accounts separate from personal accounts. Always have a formal written business plan, have an annual budget. Keep business books and records, make year end  financial statements and analysis, attend extension meetings and read extension or other educational materials related to your farming activity. Consult with professionals, have a membership to a producer association and keep track of the time spent in carrying on the farming activity. There's also the question of what parts of your business can be considered farming for the IRS, for example, timber, alpaca, custom harvesting, landscaping, or  pet kennels are not considered farms for income tax purposes. Or for example, maple syrup operations. Just collecting the sap is farming because you're producing a product up to its first marketable point. But if you are boiling sap and making syrup, that's not a farming operation, it's a processing operation. Same thing for a dairy farm that may sell cheese or a winery for fresh fruits and vegetables up to washing, grading, packing, cooling, and storage is considered part of farming. But no more than that. For grains, the drying and storage is part of farming. For honey though, processing all the way for sale is allowed. And the sharing of wool is also considered part of the farming activities in a sheep farm. Ag tourism, for example, is not a farming enterprise. It's a different kind of business. So any non-farm business activities have to be reported on Form 1040, Schedule C, which is the regular business forum. Any farm activities go on Schedule F. This makes the bookkeeping slightly more challenging if you do both. But if you have a good chart of accounts, you can handle it. So if you decide to go ahead and set up a business checking account, you need to have an Employer Identification Number with the IRS, and that is pretty easy to do online. If you go to irs.gov, there's a form there, the SS-4, and you can get an employer identification number by just filling out that form. the final point for beginning farmers is that there are ways to deduct startup costs. So you want to have your recordkeeping system activated fairly early so that you can collect all of your expenses and legally deduct them. Chapter 7 of the Internal Revenue Service publication 535, which is titled business expenses, describes how new businesses can do that. And there's also a nice publication for beginning farmers called a publication 583, starting a business and keeping records. And you can find all of these on irs.gov. Also, you can deduct business expenses incurred during the startup phase up to $15 thousand in the first year. And then you may amortize the remaining expenses and deduct them in equal installments over 15 years, starting in the second year of operation up to $60,000. Note that this is for operating expenses, not machinery, for machinery. You've got depreciation and you can start as soon as you you can start using depreciation as soon as you place the equipment in service. We'll talk more about depreciation in a minute. With respect to taxes. For those of you that are already farming, There's Schedule F, the tax form for farmers. If you go to irs.gov and search for Schedule F, You'll get the form and information about what's supposed to be on each line. Schedule F categorizes your income and expenses and profit or loss. Farm profit or loss winds up on schedule 1 first and then eventually ends up on your 1040. This is the federal individual income tax return, 2021. I'm sure that most of you have seen this or at least you've signed it. The arrows point to wages which a lot of people have. On line 8, there's a spot for business income, including farming and other business income. This comes through Schedule 1, which has an attachment to form 1040. And on line seven, there is a place that catches capital gains or capital losses reported on Schedule D. So let's stop here for a minute and define capital gains and losses. So there's different money that a business creates. One is profit from operating. You grow potatoes, you sell potatoes, that's your operating income. And the difference between what you receive and what you spend is profit, and that's your operating profit. But then you might have a capital asset, for example, a tractor that you buy, you use it for a number of years and then you sell it. And you could conceivably have a gain from the sale of that tractor. The dollars from that gain are handled differently than the dollars from operating. So this does not pass through your Schedule F, Any farm assets not held primarily for sale, such as livestock held for draft, breeding or dairy purposes whether they were bought or raised. Land, buildings and equipment all fall under here. One of the sales of business property that I'm quite familiar with is the sale of cold dairy cows. It my might be a 5, 6 or a 10 year old cow whose Milking life is over. And she has been an asset on the farm, both a productive asset and a capital asset on the farm. And then she gets shipped for beef. That's a sale of business property, whether she was purchased or born on the farm. So that money from that sale is handled differently than the sale of milk from that cow  for instance. Usually business property is on the farm for more than one year and you may have a gain or a loss from the sale of that business property. So there's a special form that catches this information and teases it all out into different categories. That's forum 4797. The sale of business property is not ordinary income. It's generally taxed at a lower capital gains rate, which has a lower rate than earned income. And you also don't pay self-employment tax or a capital gains either. You don't pay self-employment tax on capital gains either. So this is a situation where records are very important. You have to have the date of purchase, date of sale, sales price, if there's any trade involved, any expense this made it to maintain or improved or improve that asset. How much has been depreciated and if there have been any casualty losses. This allows either you or a tax specialist to categorize the sale and figure out how much of it is a return of capital invested, also known as spaces? Basically what you paid for it. How much of the gain or loss and what's taxable and at what rate? Schedule F has part one, which is operating income and part two, which is operating expenses. And then at the very bottom is net farm profit or loss. This is like an income statement or profit and loss statement, but it's not a real good one as it's missing some information. There are ways to add information to your taxes to come up with a better representation of your income once you've filled all of your tax forms. And we can help you with that. Hm. Farm income on Part 1 of Schedule F includes sales of products raised and grown, products purchased for resale and for income from land, income from farm related services like custom work. I want to move this so you can see this part here. Where was I? Income for from farm related services like custom work, payments from agricultural programs, et cetera. The general rule of the tax system is that if you get it, it's income And another general rule is that income is taxable unless it's specifically excluded. Items of income include money as well as property or services received. So if you receive property or services, as in barter and trade, you must include the fair market value of the property or services received in income. If you do machinery work or another service for a farmer, the money would appear there on line seven. If you had debts paid by another person for you or canceled by your creditors, you may have to report part or all of that as income. But overall income is pretty straightforward. Expenses though are a little more complicated. So that's why I'm trying, I'm showing you here a publication, whoops. Publication 225. It's called the farmers tax guide and it's got all the information on how the federal tax rules and regulations affect farmers in the United States. It is an annual publication and it's available online on irs.gov. And there's 16 chapters. And at the most interesting one is chapter number 4, farm business expenses. It's a good idea for farmers to read through that chapter to make sure they're claiming all of that business deductions that they are able to. In alphabetical order on part 2, farm operating expenses are let me move this out of the way. Car and truck, Chemicals. So in car and truck, you would put repairs or tires or a registration for farm vehicles. There's chemicals, conservation, customer hire, which would be if you hire someone to come onto your farm and do certain tasks. There's depreciation, which is a non cash expense that we'll get into in a few minutes, there's employee benefits, feed that you buy to feed your animals, fertilizer and lime that you buy and use on your fields, freight and trucking. Or either, to either get something that you buy to the farm or to get your product to a sales point. Gas, fuel and oil, insurance, interest, labor hired, pension and profit sharing plans, rent or lease of equipment, rent or lease or buildings or land, repairs on farm buildings and farm equipment, seeds and plants, storage, supplies, which is a big, it's a pretty big catch all. It could be everything from twine to livestock, ear tags to soaps and detergents used in the milking room. There's property taxes, utilities, vet expenses, and breeding expenses, medicines. And then there's another big catch all what is other expenses that includes educational programs that attend that are related to the farm subscriptions, recordkeeping, expenses, tax preparation, legal expenses, production, testing, et cetera. So we mentioned custom hire. If you had custom hire expenses, you have to have enough information, not just to enter an amount on Schedule F, but also fill out and send the 1099 information returns to people that you do business with. Form 1099 has to be filed for each person to whom you have paid at least $600 in rent, custom work or other types of work such as better veterinarian, attorney or accountants. And then we've been talking about depreciation as one of the farm expenses. Depreciation represents the wearing out of equipment. Ideas that you buy a capital item and it lasts for a long time. So you spread the cost over a number of years, taking a little bit of it in each of those years, you or your tax person will create a depreciation schedule. So you can calculate how much depreciation you can take in the year of purchase. How much you can take each of the years during the life of that equipment and then how much you would also taken the last year of depreciation. The asset might last well beyond its depreciable life, which is fine, but you'd be taking out a depreciation expense for a specific number of years. Irs has the very specific rules on this and how many years and the method. And that's described in the depreciation chapter of the farmers tax guide. Since purchased dairy cows and breeding cattle can be depreciated. Whereas cattle that are born on the farm or purchased for resale are not depreciated. You've got to keep track of when animals come onto the farm and when they leave and what types of animals they are. Examples of other depreciable assets on a farm or ranch. are vehicles, machinery, equipment, buildings, fences, and irrigation wells. Land is not depreciable asset because it has an unlimited life. However, some improvements to land, such as drainage tiles, can be depreciated. I mentioned a little earlier that the actual life is not the same as the depreciable life. And as it might be depreciated for seven years, but it might last for 15 years. Well, there's a couple extra fast depreciation options that may be worth looking into as you do your tax planning. The Section 179 deduction and a bonus depreciation are two ways to get your entire tax break up front. The theory is that this will lead a business owners to invest in capital equipment. So it's supposed to stimulate demand for capital equipment. There's another type of property that's called listed property, that is property used for both business and personal use. We won't go into detail on that, but there's very specific rules about how much of that can be depreciated and over what period This includes stuff like computers and cars and pickup trucks. So another expense we mentioned is a labor hired. If you have an employee, There's a number of payroll records that you have to keep and you have to withhold Social Security taxes in both federal and state income taxes from them. The amount of withholding is based on a W4 that the employee fills out and gives you when they are first hired or if they want to make any changes they'll fill and other W4 form at the end of the year you're supposed to provide a W2 for your employee. You have to pay withheld employee taxes to federal and state governments. On a timely basis. You also have to pay federal and state unemployment taxes on your employees. These are known as FUTA for the federal level and SUTA for the state level. We just hand benefits that you pay to an employee are deductible business expenses. Same with workers compensation insurance premiums. You can talk to your regular insurance agents about what the rates for Workers Compensation insurance on your employees are or could be. They vary with what your payroll is. You can hire family members and there are some special rules with them. This is all described in chapter 13 of the farmers tax guide. There's a special IRS publication called Circular E, which is the employer's Tax Guide. And that gets into the fine points and the nitty-gritty. If you employ people, you need to have an Employer Identification Number. We explained how to get one before. The employee has to give you a form I9 and you're supposed to check certain pieces of documentation that say that it is legal for this person to be working in the United States and that you have checked, you are not qualified, or expected to say whether or not that is a real social security card. But you have to say that you've seen the card that was presented. Note that inspectors do go out to check and see whether or not people are employees or independent contractors. There's a number of questions that will be asked. And one of the big ones is, does this person do the same service for other businesses, and does this person operate their service as a business? If you have the right to train, direct, or control them, or if you provide work tools, reimburse expenses and have a more permanent relationship, they are likely an employee, so you should be giving them a W2, not the 1099. If you need help with employee paperwork paperwork, you can hire a payroll service to help you with that. And some of the services you can call them and tell them how many hours someone worked and they will just mail a check so it can be pretty easy. Okay. Some other of these expenses are what some recordkeeping systems call a farm and home expenses, where they are partially farm and partially home. some examples are interest, insurance, property taxes, and utilities. For example, the town sends you one bill for property taxes. And some of it is farmland and farm buildings and some of it is your personal home. So you're supposed to tease that out and have the farm pay for the farms portion and have you as an individual, pay for the tax on your home. Same with the utilities. Lots of times there is only one meter going onto a farm. And then the thing is to reasonably allocate between the farm and the family. The same can be true for insurance. Your insurance agent can help you figure out what percent of your bills are for insuring farm buildings and your farm liability versus insuring your home and your home liability. And then finally, make sure to not include personal expenses there, like dog food, for example. Next, there are instances of what I call invisible transactions. For examples, in your record keeping system when borrowing money, cash comes in and goes out, but that's not taxable. Sometimes you may receive a return of capital that you've invested and that money is also not taxable, for example, on retirement accounts or permanent life insurance policies. So your bookkeeping system has to be able to handle these different types of transactions so that you are not paying more tax than you need to. another one is the owner's labor. The owner does not usually get paid a wage or a salary except in a corporation, the owner takes a draw, but this draw is not a deductible expense at the farm level and it's not income at the individual level. However, remember that farm profit is taxed at the individual level in a pass-through tax scenario. So the profit is their return on their investment and time and it is used to pay for family living and other needs. Reinvesting in the business or making principal payments. With respect to self-employment tax this is paid by the owner of the business based on the profit. There's a special IRS forum schedule SE for self-employment tax, sale of business property or rent and investment income are not subject to self-employment tax. And remember that Social Security benefits are based on self-employment tax paid, you need  ten quarters of social security coverage in order to have disability benefits or survivor benefits in case the main operator, is injured or killed. For retirement benefits, you need to have at least quarter, 40 quarters paid in. So if you have many, many years of low profit in means they're going to have very, very low social security benefits. So the federal government and the state government both collect income taxes, at least in Michigan. And usually states, not the federal government collect sales taxes and local governments are the ones to usually collect property taxes. With respect to collecting sales tax as a farmer. The general rule is that if you have, that, is that you have to charge sales tax on your product sales and then give that money to the state. But the good news is, there is no sales tax on food or food ingredients unless sold for immediate human consumption. So a food and food ingredients that are not subject to sales are substance's, whether in liquid, concentrated, solid, frozen, dried, or dehydrated food, a dehydrated form that are sold for ingestion or chewing by humans and are consumed for there taste or nutritional value. It can be cut, repackaged, or pasteurized by the seller. It can be mixed foods, when sold cold by volume and with no eating utensils. It can be bakery items, again, sold without eating utensils. On the other hand, food prepared for immediate consumption, which is subject to sales tax, is what is sold hot. Or where two or more food ingredients were mixed for sale as a single item. Or which comes with eating utensils provided by the seller. Alcoholic beverages and tobacco are also subject to sales tax. So with respect to paying sales tax as a farmer on your supplies, michigan provides an exemption from sales or use tax on tangible property used in tiling, planting, caring for or harvesting things like harvesting things of the soil and in the reading, raising or carrying of livestock, poultry or horticultural products for further growth. So for example, fertilizer, seed, feed, machinery and equipment are all exempt from sales tax. The assumption does not include a property affixed to or becoming part of real estate, like permanent fencing or land or vehicles. And it obviously does not include personal property. To take advantage of this, you do not need a self tax exempt number. The a certificate of exemption may be found online, on that website or on the QR code. So you just sign a certification attesting that you are in commercial agricultural production. And the seller just attaches that signed certification to the sales receipt. If you deal with the retailer that's not used to selling to farmers though they may ask you for a sales tax exempt number because they are used to selling to other non-profit groups. But in the case of agriculture, you do not need that number. You do not need proof that you are a commercial farm producer either. In most cases, if you're dealing with a regular agricultural retailer, they will have this built into their receipt and you just simply sign it and it's done. In some other cases, you have to provide to your own certification and ask for them to attach it to the receipt. Okay. So to summarize, today, we learned about different record-keeping systems and how it is a good idea to make your chart of accounts match the record keeping system. I mean, your record keeping system match your the information that you need to file income taxes. We then took a deep dive onto farm taxes for both new and seasoned farmers. And I do hope this information was useful to you and I will be happy to take any questions from you all. Thank you. All right, folks, if you've got questions here for Florencia, you can feel free to either put them in the chat or this would be a good time to unmute your mics If you want to just go ahead and ask the question directly, We're open up the floor for any questions. Okay, I see one in the chat. Jean is asking what if no profit within five years? So that's not a hard and fast rule. Let me, I'm going to go back to my slides here, which I will be sending to those of you that gave me your e-mail address. And in the part where I talk about that, I list a bunch of things that the IRS will be looking at. If you do not pass that test, the three out of five years test. So. you are a small market farm. So that's okay. The IRS will first look at whether you've made a profit in three out of five years. If you did not pass that fast, quick test, then they will look at other things. And there's a list of things there in the presentation that they will look at. But basically what I was saying is that the things that they will look at, Shannon, I will be sending you the slides later and to the rest of you also. So going back, the IRS will look at the things that you do to really make your farm a commercial farm. So the same things that you are probably already doing to make a profit are the things that are going to be telling the IRS that you are trying to make a profit, if that makes sense. So things like and there's a list there. Keep your farms bank account separate from personal accounts. Have a formal written business plan, have an annual budget, keep business books and records, and keep them separate from your personal. Make year end financial statements and analysis, which is something we, extension educators can help you with. attend extension meetings like you are today or read educational materials from MSU Extension or other organizations, consults with professionals, have a membership to a producer association, and keep track of time spent in carrying on your farming activity. Those are the examples that I had in the slide. It is being recorded and I think it is going to be posted later. Yeah. So going back to Jeans question, It's okay. You don't have to have a profit in three out of five years. If you don't, they will look at those other things. And the more of those things that you make, the safer you will be in an audit. Hopefully that made sense. Business plan is hard to make, well there are resources for that. I'm actually, if that's okay with everyone, I will send a few resources that I have for beginning farmers for writing a business plan. I have some templates and there are templates online. Another great resource for writing your business plan is the MSU  product Center. So they are this center where you pay a fee. I think it's like $60 and they help you write your business plan. They are grade with a marketing aspect of your business plan or the product development aspect of your business plan. So if you are a specialty farmer, if you're selling canned goods, those types of things, they will be great. Your business might also has to have a financial analysis and financial projections. And for that may be working with one of us in extension would be better like John or myself. We can help you write your financial statements at the end of the year. But going back to the beginning of my presentation, you have to have collected your income expenses. So, so if you have been doing that already, we would be able to create an income statement, a balance sheet for you at the end of the year. Additional questions, feel free to put those in the chat. While folks are maybe writing a couple of things, I do want to post a couple poll questions for today's session. Let's see here, I'll launch those. And feel free. Again, if you've got questions you can write them in the chat, or if you've got a microphone, feel free to unmute. There should be some simple questions that are launched there on your screen. Please take a moment to answer those. Florencia, there's a question in the chat from Kelly, So can I only deduct 15 thousand the first year? So my understanding is bad as for the beginning startup costs, that's what they are called. Yes. There is a cap to of 15 thousand dollars for the first year and then the rest of your startup costs would be amortized in the next 15 years, I believe. And I think there's a cap for that too. I'm trying to find my slide here. What did I say? I can't find it, oh here. Up to 15 thousand dollars in the first year and 60 thousand dollars over the next 15 years. So yeah. There's those two maximums there. That is not for any equipment. So it's for regular business expenses that you're using to start your business. For equipment. There is depreciation. And we did talk about depreciation a little bit. And depreciation starts counting whenever you place the item in service. So for example, a tricky thing there is that if you are not filing taxes yet as a farmer, which I assume is kind of where you're at, Kelly, greenhouse Well, electric, Electric, I assume you mean your whole electric installation. So if they are depreciable assets, which I'm pretty sure your greenhouse will be a depreciable asset. I assume your well, would be too. And the electric sounds like a depreciable asset to me though, but again, always check with an accountant. So my assumption is in your situation, Kelly, those would be depreciable assets, so they aren't deductible expenses. Deductible expenses are your everyday expenses which you may have more off when you're starting, but not your depreciable assets. Your depreciable assets are depreciable assets are depreciated over a period of years once you place them in service. So if you're farming already, that means that as soon as you bought the item you started using it, which is not always the case. You know, if you're just starting and you're not filing taxes as a farmer yet You may buy the equipment first and not start it start filing as a farmer like until six or five years down the road, then you would have placed the item in service in six years. If that makes sense, even though you may have been using it before, if you weren't a farmer than then it wouldn't count as if you had been using the item. Anyway, Your greenhouse, well, electric, Kelly, do you want to unmute yourself? Would that might make more sense? Are you filing as a farmer  last year was my first year, so everything is going to be, hold on 1 second. Yeah. She said last year was her first year filing taxes. So this will be my very first year filing taxes. Last year I bought the greenhouse. This year. I'm doing the well and Electric and install and stuff, but you know, it's a big investment in the initial years. So yeah, you're saying that only like pots and like the dirt and stuff would be actual stuff towards that 15 thousand? Yes. Yes. The other things the big ticket items like the greenhouse well, electric, you can depreciate and that's not better or worse than deducting startup costs. You can actually get the whole tax write off the first year. There's a couple very fast depreciation options that I mentioned in one of the slides to the section 179 and bonus depreciation. So it's just a different way to get your tax break Okay. depending on whether it is a depreciable asset or if it's a irregular business expense. Okay. Thank you. You're welcome. Any other questions for Florencia? Oh, another thing I was telling Kelly, in her situation where she bought the I think she said she bought the greenhouse last year. And she did not file taxes as a farmer for last year. But she will file taxes as a farmer this year. And so this year, basically you will be able to get your full depreciation of your well, and electric which are the items that you bought this year because you're filing this year and so you're placing the items in service this year, the greenhouse you bought last year. So we will, you will basically lose a little bit of the depreciation because you are not a farmer last year or you are not filing as a farmer last year, but you should talk to your accountant because since that's not been long ago at all, it may be more convenient for you to amend your taxes. So that's a that's a call that she will help he or she or they will help you make. looks like we got a question in the chat. Are there any benefits to having a LLC compared to a sole proprietor? Yeah. So John, you maybe able may be able to help me out with that one, but my opinion on that is it depends on where you're at, whether you're farming operation. Usually LLCs will be a better fit for families that are, especially when they are multi-generational. So when there's things that need to be transferred over from one Generation to the next type thing then an LLC is really useful. Otherwise, I personally don't see the need, but I may be missing something, so John fill me in. That's that's pretty much one of the main reasons that I often think about. Another reason might be that if you're wanting to keep the farm asset separated and to protect maybe some personal liability beyond what you've got in your own farm insurance. That might be a reason to have an LLC. From a tax perspective, LLCs are predominantly treated the same as a sole proprietor, so any income and expense is actually still pass through to the individuals or the member of the LLC. So there's not necessarily a lot of tax implications for one over another. It really depends on what you're doing and what your situation is as Florencia said, there are reasons for it, reasons to stay away from it. And it really just depends on your individual situation. While we're waiting for some more questions, I do want to take just a moment to highlight for folks that beyond the poll questions we asked for the conference. We are asking folks to also fill out a conference evaluation. I'm going go ahead and put that in the chat while maybe Some folks are still writing some more questions out. I do encourage people to take a look at that and provide some feedback for our conference overall. Now there's a question in the chat Florencia about some of the software you were talking about, could you maybe review some of that a little bit more? Yes. Sure. So I mentioned first paper options. Let me just go back to make sure I don't forget anything but there's paper. And with paper, I mainly was talking about the farm records book. Especially for small farms. Yes. So even if you're a small farm, you may be, so you can have a big farm and still prefer paper. Paper for example, there's many farmers that are like that. So there's the farm records book for management. I pasted the link up in the chat at some point. I can do that again right now, its bit.lyfarm records book. So that is, there's an online version, which is what you would get to if you paste that on your browser. But there's also a print version if you prefer paper. So you could use that on your computer or you could use that just print it and fill it out by hand. There's also spreadsheets that you could create your own. I have a sample one here and putting that in the chat again. so with spreadsheets, it's going to be important that you review your Schedule F items and So I'm going to be sending that presentation so that you are tracking everything you need to track. So that's unique, simple. So okay. I mean, Gretchen, that would be simple. Then there's apps, applications. I mentioned are mint, TOEFL and wave, and I'll write those again here. Those are simple. So those would be a good option for you Jean. Yeah. You can just have the app on your phone and you can even connect your bank too, always remember, if you are going to be filing as a farmer for taxes, it is a good idea to have separate bank accounts for your personal and your farm. Even if you're  small, That is one thing that I would really suggest you do. It does not cost anything really. And it will make a world of a difference if you get audited and just overall for your farm finances or for your farm accounting. So then you can connect your bank account with the app and see the transaction since they come in and reconcile, which is one of the things that I talked about in the presentation, which basically is look at it and see if anything is missing or if anything is wrong there. So some of the apps you can connect to your bank, to the app or other apps You can just go ahead and in the app enter your transactions by hand. But in the app, instead. Having them come in through the connection with a bank, hopefully that makes sense. So that's another example that I gave. Then I talked about webpages and I showed an example of QuickBooks Online, which is a paid one and it may be more complex than what you need Gene that will depend on your situation. But if you're looking for a cheaper webpage option, wave, which is the third one I wrote in the chat there. They have an app, but they also have a webpage and they are quite complete accounting system and a free one. So that maybe one option for you to look at. And finally, I think the last example that I gave was softwares. And QuickBooks is a popular one and one that telfarm which I mentioned at the beginning of the presentation, works with and we also work with PC Mars. I'll write that down here because you may not have heard about PC Mars before. That's another accounting software. It's paid, it's created by the university well, not the University of Iowa but a group farm business. group in Iowa. And they are specific for farms. So that's the nice thing about PC Mars, that they really understand farming. And they make it very easy, both especially PC Mars, QuickBooks, in the second place. They make it easy for us to do your financial, financials at the end of the year, your balance sheet, your financial analysis, if you want to get that done, which is one of the things that the IRS would look at if you've got audited. We can import that information into an analysis system and give you a really complete output with comparisons to other farms and all sorts of really cool information. It's really easy for us to do that if you are using PC Mars or QuickBooks, if you're in paper, we still can do it, but it's going to take some manual entry from both our part and you with inputting together the information such that it matches that our analysis system. Hopefully that made sense. Again. And if I didn't clarify, let me know. I'm going to put my e-mail address in the chat. We have a lot of, and so John Lacord does a lot with beginning farmers. And I tend to work with beginning farmers also. So either him or myself, let us know if we can help. I cover West Central Michigan. But, but I also do a lot of work with minority producers. And there's a lot of people, especially on the east side of the state, the Detroit area that I've been working with recently. So if you're an urban farmer, you know, those types of things. I may be able to help with some questions.