Tax Time for a small winery

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Brewkowski

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So my folks just finished opening a small winery and they've been in business for a bout 3 months and I've been telling them to ready up their books for closing out the year. So a few basic questions if anyone has any general knowledge in this area. No advise that is billable:D

1) Last year they used their local H&R Block office, is that good enough or should they really be looking at an accountant that they can meet with 3-4 times a year to reconcile and advise more. They felt the H&R lady was good but basically doing data entry and not providing any guidance

2) Should bulk juice and wine be categorized as a pre-paid expense, and if so can you journalize it per bottle sold or easier to make monthly entries

3) Normal depreciating schedule? Assuming they are somewhat like a farm for tax purposes http://www.cals.ncsu.edu/agexed/sae/deprec.htm Googled and found this site.

Newly constructed building 20 Years
Farming equipment/computers 5 years
Fermenation/bottling equip 5 years
Vines bearing fruits 10 years
Freezers/coolers 10 years
Dogs work to prevent deer from eating grapes (depreciate them?)

4) The only real expensese they would have would be the Opening Party, Bottles, corks, label printing, licenses and fees, basic small tools or equipment needed, glassware, retail invoices, trade publication subscriptions,

They've got Quickbooks, but I think they're just now really starting to make entries.

Any basic information that they should consider or major concerns for a first year business? Pretty much what I've told them so far is find a local accountant with a decent reputation.
 
The answer to #1 is they need a real accountant. That's also the answer to numbers 2 - 4. I'm sure we've got some accountants around who can give some advice, but really they need someone that they can work with.

Maybe it's different elsewhere, but the H&R Block people I talk to every March/April are tax preparers, not really *accountants*. These are complicated issues, you don't really want to futz around. If that's the impression that they're getting from the woman they're working with, it's time for them to upgrade, so to speak.

Ideally you'd find someone with specific knowledge of the wine/farm industry; are they friendly enough with any other local winemakers to ask who they work with?
 
Thanks for the advise. I'm advising them to call a local winery, they're friends with a few of them. I think they were worried that people won't like the competition using the same account, like they're going to whisper secrets. I'm sure accountants are cheaper than near the Chicago area, but will still probably cost $100/hour or so. I said they should look for an agreement that probably includes a few basic consulting meetings in addition to tax filings. I think they kind of got hosed last year because they were behind the eight ball a bit and went to H&R. Not that they're bad people, its just for basic entry and they can't really provide insight into planning.
 
Not to mention that there are specific federal tax issues for alcohol production that H&R Block won't know how to file properly.

You really need an accountant that has some knowledge and experience working with other wineries.
 
Yep, try to find a tax accountant (CPA, or EA preferably), they may also want a bookkeeper....normally a good accountant will recommend one.
 
Tax CPA here. You really should find a full time tax preparer. Don't need to be a CPA, but at least an enrolled agent (EA). I used to work at a CPA firm in the Chicago area so if you want a recomendation send me a PM.

Anybody can prepare a return. What you need to look for is someone to help guide them and do some tax planning, not just filing the returns. Tax law is complex and the IRS is not forgiving.

You can also go the the QB website. They have Pro Advisors listed that can help out as well.
 
Well they're in Southern IL, so not sure what kind of variety they'll have for looking up tax professionals. Thanks for all the info, I'd never even heard of an EA before, guess I'll check into that a little more. I'm really going to push for them to contact some other wineries in the area. Good point on the bookeeper, but not sure they can really swing that on their starting income at this point. Basically that would be someone to do journal entries and bank rec's?
 
Yes they can get a bookkeeper to do the JE's and bank rec's for them. Usually the bookkeeper is an EA and can file the taxes for them. They can also do payroll, sales tax and other required filings, once they get to that point.

Word of mouth is the best way to find a professional they can trust.
 
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