The end of a calendar year is a busy time, especially for business owners. Closing out the books, handing out bonuses, and planning for next year’s goals all take time, attention and effort. It is also a moment to get everything ready for taxes, which are due every year on April 15.
Since taxes are no one’s favorite thing, especially as a cannabis business owner, finding a good cannabis CPA (Certified Public Accountant) or helpful cannabis tax prep info is critical. Here is information essential to cannabis accounting.
Marijuana-Related Taxes are Unique
Due to federal tax code from Section 280E, businesses in the cannabis industry pay more than twice to the IRS what other types of businesses do. This is because companies selling federally illegal substances are prevented from taking normal business deductions. Additionally complicating matters, federal classification of cannabis as a Schedule I controlled substance means significantly fewer banking institutions are willing to have cannabis-related clients. Along those same lines, cannabis businesses receiving more than $10,000 in cash in a single transaction must file Form 8300 within 15 days. And quarterly estimated tax payments, based on projected annual income, are also required. State taxes are also to be considered, and vary widely.How to Streamline the Process
Working with a cannabis CPA firm is a wise decision, but the process can still be a headache without proper preparation. Help yourself and your cannabis CPA with these steps.- Gather and provide complete documentation. This includes cash handling logs, business receipts, payroll records, profit and loss statements, and records of taxes paid during the year. The best course here is to keep up with it throughout the year, monthly or quarterly is often easiest to manage.
- Prepare for audits. Because the IRS and state Departments of Revenue know cannabis-based businesses are largely cash businesses and they want to ensure all owed taxes are paid, audit chances increase greatly. Maintain thorough records of income and expenses throughout the year, keep them organized, and retain them for seven years.
The Right CPA for the Right Time and Place
Cannabis accounting or cannabis CPA firms assist businesses in navigating the complexities of cannabis tax prep by confirming compliance with all applicable regulations. Service options typically include tax planning, financial reporting and auditing. While selecting the right CPA for your business is important to all kinds of industries, it is vital to cannabis-related ones. To pick the right cannabis CPA for you, confirm these minimal requirements:- Transparent communication. Taxes are confusing, stressful and expensive when done incorrectly. Having transparency and clear communication with your CPA is of utmost importance. The best CPA should be able to explain complex accounting concepts in plain language, as well as keep you informed about financial status and regulatory changes that may affect your business.
- Both experience and expertise. A CPA who has specific experience in the cannabis industry will be aware of the distinctive applicable challenges and regulations. Additionally, they should be up-to-date with the latest tax-applicable changes in cannabis and have a track record of working with similar businesses.
- Understanding of local laws. As regulations can vary significantly from state to state, even county to county, it is key to choose a CPA who is well-versed in the laws specific to your area.
- Comprehensive services offered. Beyond tax preparation, a quality cannabis CPA or firm should be able to assist with auditing, bookkeeping, financial planning and more. This streamlines cost and work.