Canadian farmers of all types — from dairy to fruit to livestock — contribute to the healthy lives of Canadians. The Canada Revenue Agency (CRA) has made filing your taxes easy, so you can save your energy for the harvest. The agriculture and agri-food industry is vital to the economy, and the CRA wants to make it easy for Canadian farmers to grow their business.
Who’s a farmer?
If you raise a few farm animals or have a plot to grow your own food, you are considered a hobby farmer, rather than a business, and you can’t deduct any expenses or losses. On the other hand, if you devote the majority of your time to farming by investing in buildings, machinery, and inventories to run the operation, you’re likely the owner of a farming business. Keep in mind that farming income does not include money earned from working as an employee on a farm or from trapping.
For more information on farming, including the types of farming income and deductions and tax credits available to farmers, go to www.cra.gc.ca/farming.
Generally, farmers can deduct any reasonable current expense incurred to earn farming income, including interest on loans and losses, and the cost of fertilizer, feed, veterinary fees and materials to pack and ship goods. Other expenses that may be eligible include machinery rental, electricity, insurance and motor vehicle expenses. And if you decide to farm out some of your accounting duties, you can also deduct the fees you paid to your accountant.
Not every year can be a winning year. If you had a farm loss for the year, you may be able to deduct up to the full amount of your loss. A farm loss can be carried back from the current year to any of the previous three years or carried forward up to 20 years. For more information on farm losses and how to calculate and apply them, see Chapter 6 of CRA Tax Guide T4003. (Find this document online at www.cra-arc.gc.ca.)
Eligible farmers who dispose of breeding livestock in a tax year because of drought or flood can exclude a portion of the sale proceeds from their incomes until the following tax year, under the Livestock Tax Deferral Provision. The rule also extends to bees and to all types of horses that are over 12 months of age that are kept for breeding. (Find more information about this by searching for “Livestock Tax Deferral” on the Agriculture and Agri-food website at www.agr.gc.ca.)
Are employee expenses deductible?
Do you hire seasonal farm workers? If you hire a qualified Red Seal trade apprentice, such as an agricultural equipment technician, you may be able to claim your employee’s salary as an expense. You may also be able to claim the apprenticeship job creation tax credit. This non-refundable investment tax credit is equal to 10 per cent of the apprentice’s salary or wages. The maximum credit an employer can claim is $2,000 per year for each eligible apprentice. For more information on the Apprenticeship Job Creation Tax Credit, go to www.cra.gc.ca/smallbusiness.
What about errors and instalments?
You pride yourself on producing the cream of the crop, so don’t risk your reputation by underreporting your farming income. Under-the-table cash deals undermine the integrity of Canada’s tax system and deprive Canadians of funds for vital programs that benefit everyone. If you are caught evading taxes, you may face fines, penalties, or even jail time. Save yourself the trouble — don’t participate in the underground economy. For more information, go to www.cra.gc.ca/undergroundeconomy.
Stay on top of your record keeping throughout the year to avoid the stress of ploughing through countless invoices and receipts. You need to keep complete records of your business-related expenses to support your claims. Without these supporting documents, the CRA could disallow your credit or deduction. Plant the seed and get in the habit of keeping complete records! To learn more, go to www.cra.gc.ca/records.
If you have ever made an error or omission, the CRA is offering you a second chance to correct your mistake through its Voluntary Disclosures Program (VDP). If you make a valid disclosure before you become aware of any compliance action taken against you by the CRA, you may only have to pay the taxes owing plus interest. Find more information on the VDP at www.cra.gc.ca/voluntarydisclosures.
If you owe tax or have to pay tax by instalments, take advantage of preauthorized debit to set up your payments. To learn more about your payment options, go to www.cra.gc.ca/payments.
When’s the deadline?
The deadline to file most Canadian income tax and benefit returns for 2015 is April 30, 2016. However, since this date is a Saturday, the CRA will consider your return as filed on time and your payment to be made on time if it receives your submission or it is postmarked by midnight on May 2, 2016. Self-employed individuals and their spouses or common-law partners have until June 15, 2016, to file their income tax and benefit returns, but any balance owing is still due no later than May 2, 2016.
From the growing popularity of farmers’ markets to farm-to-table menus, today’s consumers want locally grown and sustainably sourced produce and meats. Another trend most Canadians are cultivating is filing their taxes online! Filing online is fast, easy, and secure. If you’re entitled to a refund, you can enjoy your money in as little as eight business days, by combining online filing with direct deposit! For a list of tax software and web service options, including those that are free of charge, go to www.cra.gc.ca/netfilesoftware.
New this year, the CRA’s Auto-fill my return service is available through some certified tax preparation software. This secure service automatically fills in certain parts of your income tax and benefit return. To use Auto-fill my return, you must complete your registration in full for My Account. For more information, go to www.cra.gc.ca/auto-fill.
You know the growing seasons and plant rotations by heart, but what about important dates related to your taxes? Like the Farmers’ Almanac, the CRA Business Tax Reminders app can help! This new app lets you create reminders and alerts for key CRA due dates for instalment payments, returns, remittances, and other tax-related business matters, so you won’t have to worry about penalties and interest.
You can also stay up to date by registering for online mail through either My Account or My Business Account. When you register for online mail, we will no longer print and mail eligible correspondence. Instead, we will send you an email when it is available to view in your secure online account. Access these services through CRA’s My Account or My Business Account, available at www.cra.gc.ca/loginservices.
Stay on top of the latest CRA news or tax tips by following @CanRevAgency on Twitter.
For Grainews readers who prefer to get their tax information off-line, call the CRA’s general inquiries phone number, 1-800-959-8281. They will be able to answer your questions and send you paper copies of the forms and publications you need.
Heidi Hofstad, CRA spokesperson