Get Your Farm Books Ready for Tax Season: A 6-Step Checklist

Tax season is here, and the clock is ticking. Farmers who didn't pay estimated taxes face a March 1 filing deadline—that's less than four weeks away. Whether you're filing soon or targeting April 15, now is the time to get your books in order. Here's a practical checklist to make sure nothing falls through the cracks.

1. Reconcile Every Account Now

If you haven't reconciled your bank and credit card accounts through December 31, stop everything and do it first. Unreconciled transactions create discrepancies that can trigger IRS scrutiny and cause you to miss legitimate deductions.

Pay special attention to transactions from late December that posted in early January—these belong in your 2025 tax year.

2. Verify Your Loan Balances

Contact your lenders to confirm year-end loan balances and total interest paid in 2025. Interest expenses are deductible, and accurate liability reporting affects your financial ratios for future lending.

Pull statements for operating lines, equipment loans, and real estate mortgages. Make sure your books match lender records exactly before handing anything to your tax preparer.

3. Document All Asset Transactions

Equipment and land transactions carry significant tax implications. For each 2025 asset purchase, sale, or trade, verify you have:

• Purchase date and placed-in-service date

• Total cost including delivery and installation

• Closing statements (printed or PDF) with all details of each transaction

• Sale proceeds if assets were sold

Section 179 deductions and bonus depreciation can dramatically reduce your tax liability—but only if properly documented.

4. Clean Up Uncategorized Transactions

Those "Ask My Accountant" entries? Your accountant is asking about them right now. Every uncategorized transaction represents either a missed deduction or potential audit risk.

Common culprits include mixed-use purchases, cash transactions without receipts, and transfers between accounts. Classify them now while you can still remember the details.

5. Review Your Financial Statements for Red Flags

Pull your 2025 income statement and balance sheet with fresh eyes. Look for anomalies: Does fuel expense seem unusually high or low? Are repair costs in line with previous years?

Unusual variances often indicate mis-coded transactions that need fixing before you file. If using Traction Ag, it's easy to drill-down on these reports and a breakdown of values. Anything that is wrong, you can easily fix it.

6. Confirm Your 1099s Were Filed

The January 31 deadline for 1099-NEC, 1099-MISC, and 1099-INT forms has passed. If you haven't filed yet for anyone you paid $600 or more for services—contract labor, veterinary services, custom hire work—you're already late. File immediately to minimize penalties, which start at $60 per form and increase the longer you wait.

Don't Wait Until the Last Minute

March 1 comes fast. Block time this week to work through this checklist, and your tax preparer (and your stress levels) will thank you.

Need help getting your farm books organized? Traction Ag makes tax season prep simple with modern farm accounting software. Get started today with a free trial.