Before we begin, we need to emphasize the importance of consulting with your tax advisor on all matters pertaining to tax requirements. Bankers do not take the place of tax professionals. However, they still play a valuable role in helping you make informed decisions.

As harvest season starts winding down, end-of-year tax preparation will kick into full gear. If you’re feeling less than ready for December 31, you still have time to make adjustments to reach your tax goals.

Lance Vilhauer is Assistant Vice President and Business Banker for Plains Commerce Bank in Aberdeen, South Dakota. In his seven years at the bank, he’s worked with eastern South Dakota corn, soybean, and wheat producers, as well as cattle cow/calf and feedline operations. And he has a tremendous grasp on the local ag and banking landscape.

If you’re ready to reach the tax goals you set with your accountant, Lance shares helpful information on how your bank can help.

How can banks help farmers when it comes to taxes?

Looking for ways to reduce your federal income tax bill? Banks have many products that can help you achieve this. Let’s take a look at a few options for farmers.

Prepaid Operating Line of Credit

To reduce taxes, one strategy is to purchase prepaid expenses. “Producers will buy inputs like seed, chemicals, and fertilizer—and prepay before December 31,” says Lance. “If you qualify for a prepaid operating line of credit, say $75,000–$100,000, this could give you enough to cover the checks for the prepaid expenses. Each producer is different, and it goes back to creditworthiness and overall financial strength, but this is a tool numerous producers use.”

Equipment Loans

Are you anticipating new or additional farming equipment needs in the near future? Taking out an equipment loan to buy it in the current tax year may help reduce the taxes you owe. “As long as the purchase makes sense for the year and the applicant qualifies, this is another popular option,” says Lance.

Prepaid Interest

If you need another way to increase your yearly expenses, prepaying interest may help. “Some of my customers will pay current interest, even if a payment isn’t due,” says Lance. “Say to date a farmer has $2,000–$3,000 of accrued interest, it’s similar to prepaid expenses.” You can pay it now, and have that reflect on this year’s taxes.

What else can farmers do to prepare for taxes throughout the year?

Don’t wait until December 31 to evaluate your tax situation. Do it now.

Pay attention to the details.

“Good producers continuously look at income and expense numbers throughout the year,” shares Lance. “They have good attention to detail, too. Having detailed records is important. Completing a cash long/short document is a great way for a producer to dial in and determine how much they have left to sell, what bills they have to pay, and if they have any cushion, too.”

Check in with your accountant.

Also, talk to your accountant to make sure what you’re planning will actually benefit you from a tax standpoint. “Even buying 15–20 cows before end of year can make a big difference, depending on the situation,” continues Lance. “The producer just has to coordinate with the tax advisor first, and then come see us at the bank.”

Consider a community bank.

When it comes to choosing a bank, take your needs into consideration. Community banks have products similar to a big bank, but often have a more personalized touch.

“We don’t do the cookie-cutter look at a few numbers and approve or deny,” says Lance. “We know our producers well enough to say if something makes sense financially or not. We get to know their operations on an extremely personal level and strive for great communication. Our customers call in just to bounce ideas off us, and that’s what we’re here for.”

If you’re not getting personal feedback from your banker for your farm operation, we have a whole team of people at Plains Commerce to let you know what we can offer. If you’re not sure about something or would like our opinion, get in touch with us, and know there’s no obligation to use our banking services.

This article contains the author’s opinion on the subject. Plains Commerce Bank and its employees hereby specifically disclaim any personal liability for loss or risk incurred as a consequence of the advice or information presented in this letter.