Can You Have Your Pipe and Smoke It Too?
The cannabis industry is booming and continues to garner mainstream acceptance as more and more states contemplate legalizing it.
What many cannabis business owners need to be aware of, but often are not, is that there are very specific rules outlined in the IRS’s tax code of which they must be in compliance. Specifically, Section 280E, which bars ‘drug traffickers’ from taking business expense deductions on their taxes. In other words, cannabis entrepreneurs must pay taxes on ALL of their revenue, without the benefit of being able to use business expenses to reduce their taxable income. The only exception being the cost of acquiring the product intended to be sold. All other ‘costs of doing business’ cannot be filed as a deduction.
As long as marijuana is considered illegal under Federal law, cannabis businesses, even in states where it has been legalized, are barred from reaping the full tax benefits of other businesses.
There are financial experts that cannabis entrepreneurs should seek out as soon as possible that can navigate them through the murky waters of the Tax Code and keep them off the IRS and State Authorities’ radar. Cannabis business-centric firms like cannabistaxsolutions.com know what red flags can trigger an audit (and how to avoid them), how to properly prepare income tax returns and also provide accurate monthly financial reporting. Engaging the services of such a firm can end up saving you big money in potential IRS penalties and interest and safeguard your business from being shut down for outstanding tax debt.
Note: If you’re an entrepreneur in the cannabis industry, and your business is currently on the IRS’s chopping block, DO NOT TRY TO DEAL WITH THEM ON YOUR OWN! They are incredibly adept at extracting information, and you could end up saying the wrong thing and making your situation worse. You should instead hire the services of an expert in cannabis taxing and accounting to deal with the IRS on your behalf. Firms like cannabistaxsolutions.com advocate for their clients, and they know what to say and what not to say to get you the best possible resolution.