While we’re all required to adhere to applicable federal and state income tax requirements, laws and deadlines, the cannabis industry’s situation is unique. Cannabis CPA offers our tax prep knowledge and expertise to individuals, partnerships, trusts and any other type of company involved in the cannabis business. When you work in this industry, weeding out all the inexperienced or green accountants well before tax season is a good idea!
The IRS provides these helpful tax preparation tips for marijuana business owners:
Know your investors. The social stigma and federal designation of cannabis as an illegal substance may lead to unregistered and “silent” owners. “Beneficial” owners sometimes engage in their activities using a different name, which can create inaccurate income reporting or even result in a failure to file taxes. Also, cannabis companies are prone to losing their businesses by trusting bad actors who invest heavily and then claim ownership and use the business for money laundering.
Ensure you’re licensed in your state and municipality.
File and pay your taxes on time even if you operate a cash business. Whether from a legal or illegal source, all income is taxable and must be reported. There are no exemptions from employment tax obligations and making payments on time prevents penalty and interest fees.
Report cash transactions of more than $10K in a single or related transactions on Form 8300 within 15 days after receiving payment.
Keep good records. Keep all receipts that support an item of income and maintain records of all expenses, even those that are not legally deductible at the federal level.