The tax move is in December. The records that make it possible get pulled together in October.

Most farm tax planning happens in the last two weeks of December, in a hurry, with numbers that are a guess. The moves are real, prepaying inputs, timing a calf sale, buying a piece of equipment, but every one of them depends on knowing what the year looks like, and by the time the accountant asks, the year is over. The work that makes December useful is done in October.

What to have ready

By early November, put together:

• Income to date, by category: calf sales, cull sales, grain sold, custom work, government payments, crop insurance, patronage dividends. Pull the sale barn statements and the elevator settlements; do not estimate.
• Income still coming: calves not sold yet, grain in the bin, a disaster payment that has been approved but not paid. This is the number that decides the year.
• Expenses to date, from the checkbook or software, in Schedule F categories: feed, seed, fertilizer, chemicals, vet, fuel, repairs, labor, rent, interest, insurance, depreciation.
• Equipment bought or sold this year, with dates placed in service. The bonus depreciation piece from last month covers what that is worth.
• Debt: principal paid on term loans, which is not deductible but affects cash, and interest, which is.
• Last year's return, so the accountant can see the carryovers.

An hour with a spreadsheet gets you to a projected net. That number is what the December conversation is about.

The tools cash-basis farming gives you

Prepaid expenses. A cash-basis farmer can deduct feed, seed, fertilizer, and similar supplies in the year paid, even if they are used next year, as long as the prepayment is a real purchase, not a deposit, has a business purpose beyond tax, and does not distort income. The limit is that prepaid supplies cannot exceed 50 percent of your other deductible farm expenses for the year. In a good year, prepaying next spring's fertilizer and this winter's feed in December is the standard move.

Deferred sales. A calf sale contract that is signed in December but pays in January is January income, if the contract is a real deferred-payment contract and you did not have the right to the money sooner. Most sale barns and elevators offer this. It does not make the income go away; it moves it.

Crop insurance and disaster payments. If you normally sell the crop the year after harvest, you can elect to defer a crop insurance indemnity to the next year. Same for some disaster payments.

Income averaging (Schedule J). Farm income can be spread over the prior three years' tax brackets. In a year where calf prices doubled your net, this is the single biggest saving available, and it is elected on the return, not planned in December.

Section 179 and bonus depreciation. A write-off for equipment placed in service by December 31. Real if you needed the equipment anyway. A loan against next year's taxes if you did not.

What to do with a good year

This is a good year for most cow-calf operations. The temptation is to make it disappear. Some of that is smart. Some of it is buying a $180,000 tractor to save $50,000 in tax, which is not a savings.

The better order of operations: use income averaging first, because it costs nothing. Prepay the inputs you were going to buy anyway. Fund the retirement account, SEP or solo 401(k), which is a deduction that stays yours. Pay down operating debt, which is not deductible but is the thing that makes the next bad year survivable. Then, if there is still income to shelter and a piece of equipment that actually needs replacing, buy the equipment.

And consider paying some tax. A year in a 22 percent bracket after averaging, with the debt down and cash in the bank, is a better position than zero tax and a new payment book.

The self-employment tax piece

Schedule F income is subject to self-employment tax at 15.3 percent on top of income tax, up to the Social Security wage base. This is where farm income gets expensive. Rent paid to yourself through an entity, wages paid to a spouse or children who actually work, and the retirement contributions above all reduce it, and every one of them needs to be set up before the year ends, not after.

The meeting

Book the accountant for the week before Thanksgiving. Bring the projection. Ask three questions: where does the year land, which of the tools above apply, and what has to happen by December 31 for each one. Then go do those things in early December, when the sale barn and the co-op are not slammed and you are not making a $50,000 decision on the 30th.