Your AG Clients are Special

Geoff Currier and Evelyn Jacks

It’s one little line on the T1 tax return, and it’s important: Line 14099, followed by 14100. If you can unlock what is behind these boxes, you can become a reliable partner for a very special profile of taxpayers in a stable business in the midst of succession planning. The lines refer to farming income and specialists in this area of tax preparation are in high demand.

The Backdrop. The "Agriculture Taxation Data Program" (ATDP) uses tax records to produce data on farm revenues and expenses. The program covers incorporated farms and communal farming organizations with total operating revenues of $25,000 or more, and unincorporated farms with revenues of $10,000 and over.

The most recent data from the 2021 Census of Agriculture indicates that the number of farm operators declined by 3.5% from 2016 to 2021, from 271,935 to 262,455. The number of total farms has followed a similar downward trend. 

Farming is a challenging and unpredictable business. Canadian overall farming income fell by a whopping 26% in 2024, reducing the overall income of our food producers to $9.4 billion. Lower crop prices, higher expenses and a decrease in insurance and program payouts all contributed to the decline. But that doesn’t mean that specializing in farm tax preparation isn’t growing.

The Opportunity. The overall tax preparation services industry in Canada has been growing, with a compound annual growth rate of 2.5% between 2020 and 2025. This growth is attributed to a variety of factors including complex tax regulations, the CRA’s push to digitization, small business growth in the post-pandemic era, all of which also apply to farm businesses.

The trend is towards fewer, but larger, farms, which are often incorporated. These operations typically require specialized tax planning and professional assistance and can provide for a variety of wealth building opportunities across multiple generations.

Plus, the Canadian tax system for farmers is complex, involving specific rules for income (like income deferral opportunities when there is drought), enterprise-specific expenses (including a variety of capital cost allowance options for machinery and equipment), and in the case of succession planning, new intergenerational business transfer rules. That’s what creates a consistent demand for professional tax services.

You Can Provide Specialized Services including Ag: This is an area of tax preparation that is rewarding and intellectually stimulating. Plus the people are wonderful to work with!   

Farming enterprises can take many forms: is this a full time business operation? Is it a part time operation with the expectation of some profit or is it a hobby with no expectation of profit? These circumstances will have different impacts in tax preparation.

And, your interview techniques and relationship skills will be put to the test as well, as you get to know your client better. Is this producer in the canola or the cattle business? The egg or the corn business? Does the farmer raise live chickens. Does he/she have property hatchery insurance? If there is an outbreak of Avian Influenza, will the entire flock be culled? You will need to help this client navigate both the tax implications of such a disaster, and the personal heartbreak as well. It is sometimes difficult, but very rewarding work.

How to Report Farming Income: When it comes to farmers and their partners, there are some basics which as a tax professional you must understand and you will also need to effectively communicate those basics to your clients. For example, there are options for how your clients will report income. They can use the cash method or the accrual method of accounting.

When using the accrual method, the government tells us that “the value of all inventories, such as livestock, crops, feed fertilizer, supplies, and so on, will form part of the calculation.” 

Is your client in a partnership with a spouse or other family member, or perhaps someone outside the family? If so, each partner must provide CRA with a statement of farming activities for the partnership for the year.

Also, form T2043 must be filled out. This is the return of fuel proceeds to provide farmers with access to a tax credit.

Be Familiar With All of the Necessary Forms: Here’s where preparing returns for farmers can get even more interesting. If your clients are participating in the AgriStability and AgriInvest programs, there are specific forms for each province and territory. You will need to familiarize yourself and your client with these forms. These are joint federal and provincial-territorial programs. 

 AgriStability is a margin-based program for when your client experiences large income losses. This is a joint federal-provincial program which helps farmers cover losses which are below a 30% threshold, based on historical averages. It covers up to 90% of losses up to a maximum of $6 million. It’s part of what’s called the Sustainable Canadian Agricultural Partnership. Your client will need to know that enrollment, fees and filing of tax information by deadlines are all required.

AgriInvest is a self managed producer/government savings account. It is also a federal-provincial program and is designed as a savings plan to assist producers through cash flow challenges. Producers may contribute up to 1% of their allowable net sales into an account. That amount is matched by the federal and provincial governments, thereby providing a cash flow safety net.

A DMA – Specialist™, can demystify these programs for your farming clients. Inquire how you can get involved to attain this designation from Knowledge Bureau to shore up your skills.

Some Unique Aspects of Ag: If you are serving clients who farm for a living, you’ll be aware of how much of their business is out of their control: examples, weather, seed and feed prices, tariffs and market prices for their end products. You can help them control what is within their reach: keeping accurate tax records to pay as little tax as legally possible and to avoid the possibility of a CRA audit. Ag producers often complain about the difficulties in dealing with CRA. They need your help.

Farms and the Family: If the farm is owned by a family and has been passed down, a proper succession plan is critical. Be sure your clients understand what is involved in passing the family farm along to the next generation. If there are no children or the children do not wish to continue in the family business, how will the sale or transition of the farm be handled? 

If the farm has been in the family for some time, the capital gains could be massive. Farms purchased for a few hundred dollars a hectare will have increased in value many-fold. 

Since farming is so often a generational occupation, securing a farmer for a client can present you with an opportunity to serve subsequent generations and continue to build your business.

However, if the farm is not going to be passed on to a family member, a solid plan will be needed for when the time comes to sell. Do the farmers plan to sell and retire or pass the farm along to children with the expectation that they will then sell the property?

The Bottom Line: The people who produce our food are in a highly sophisticated business. As such they need expert tax and financial advice. This could be an area of huge growth for you and your firm.

Check out these educational resources from Knowledge Bureau to help: (hotlink to landing pages)

• The DMA-Specialist™ Designation Programs in Personal, Corporate, Accounting or Small Business Services.
• The RWM™ Designation Program – become the leader of a multi-advisory team in charge of an intergenerational wealth management strategy for your clients.
• The January 21 Advanced T1 Tax Update – a Live Virtual Professional Development Experience that features expert tax faculty,  access to the Evergreen Explanatory Notes professional tax research library and a 10 chapter online course.