By Harry Shurek of MyCannabisAccountant
While April is still several months away, the end of the year is fast approaching, which means it’s time to start thinking about tax planning. For hemp and cannabis businesses, tax time can be incredibly stressful. Filing taxes can be a chore for any business, but it can be exceptionally challenging for those in these industries. Planning now can help save you a massive headache, especially if you have the right help.
Understanding a Little About 280E
One of the biggest issues come tax time for your business is IRS code 280E. Based on this code, cannabis companies can’t deduct normal business expenses — they can only deduct the cost of goods sold (COGS). As such, you have a much higher tax burden than many others. There are also many other regulations you need to follow to stay compliant and maintain your license. Hemp, on the other hand, is no longer a federally controlled substance. As such, the limitations of 280E don’t apply. Hemp businesses still need to adhere to strict regulations, including those related to bookkeeping and taxes.
The Importance of Tax Planning Now
Why start tax planning now, before the end of the year? For one thing, the sooner you get started, the easier tax time will be. Putting off your tax planning adds more work to your pile later.
By giving yourself the time, however, you can reconcile discrepancies before it is crunch time. You will save yourself a significant headache and unnecessary stress by taking the steps to ensure your compliance with state and federal regulations.
Tips for Tax Planning Success Let’s face it: Taxes for hemp and cannabis businesses are complex. They may even be downright frustrating. Fortunately, there are things you can do to limit your stress and ensure you file your taxes correctly and on time:
Close Out Your Books Before you begin tax planning, reconcile your books for the year and close them out. Any incomplete or inaccurate information can have major consequences come tax time. It can also create complexity and cause delays.
Justify Your Numbers
Audits of cannabis businesses can happen at any time. Instead of waiting for one to happen, act like it’s a certainty. Have accurate records and keep them on file, just in case. The cannabis industry is cash-heavy, which means you do have to put in some extra effort, but having accurate proof that your numbers are correct can help you to avoid problems.
Consult a Professional Cannabis Accountant Again, regulations for cannabis and hemp businesses are incredibly complex. To ensure that your books are accurate, and you have everything you need for tax time — and for compliance — consider consulting with a cannabis accountant. Having an experienced professional on your side will help to ensure you have everything in order when it is time to file.
Start Your Tax Planning Now The end of the year will be here before you know it, which means tax time will be right around the corner. If you start planning now, you will be ahead of the curve, making tax filing at least a bit more bearable. For more tax advice look no further than MyCannabisAccountant!