Preparation

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.

Our tax prep services include:

• Reviewing the latest tax laws and court decisions
• Ensuring that your bookkeeping records are tax-ready
• Checking for all deductions that apply to your business
• Preparing your federal and state returns
• Reviewing your tax returns for accuracy
• Explaining your returns and tax liabilities
• Electronically filing your tax returns
• Helping you make changes for the following year
• Determining amounts and dates of estimated payments
• Maintaining your records and providing you access
• Being available to you throughout the year

When tax time rolls around, be sure to have the following information on hand so we can provide accurate cannabis tax return preparation:

Income: Gross receipts, returns and allowances, interest earned on your business savings and checking accounts, and any other income.

Expenses: Bank and finance charges, interest expenses, wages paid to employees and contract labor, health and other types of insurance premiums, employee benefit expenses, computer/Internet expenses, business meals/entertainment expenses, advertising/marketing costs, office supplies, utilities costs, taxes/license fees, travel expenses, etc. NOTE: Many of these may not be deductible but we’ll help you find those that are.

Cost of Goods Sold (COGS): Costs for cleaning, trimming, curing, packaging and inventorying, costs of raw materials and seeds, and indirect product costs such as equipment maintenance, supervisory wages, quality control and inspection fees, and the cost for utilities directly used to grow the product.

Documents: Copies of the previous two years’ federal, state, local and excise tax returns, balance sheet, cash-handling log, profit/loss statement, employee ID number (EIN), seller’s permit number, income statements, bank statements, names and Social Security numbers of owners and business partners and their ownership percentages, articles of incorporation, building lease information and improvement receipts, and receipts for new assets.

Don’t leave your tax prep to anyone but the seasoned professionals at Cannabis CPA! A CPA or even an experienced tax accountant cannot possibly have the specialized, industry-related knowledge and skills that we possess. We understand what you can and cannot deduct and how to minimize your taxes while remaining legal in the eyes of the IRS. Don’t risk your business — or let it go to pot, so to speak — by working with the wrong accounting firm.