Important tax questions and how to go about the IRS
There are questions, a lot of them to be quite frank, especially in a business that we are trying to run legally but that the tax law does not want to see as a legal business. Since cannabis classifies as a substance II drug,
The Dope Tax Group is here to make sure your business is run legally.
So, even though the federal government considers your corporation a prohibited activity, you still have the same income and employment tax filing obligations as any other company. In simple words, illegal businesses have no exemption from their employment tax obligations so let's take a closer look at some frequently asked questions out there.
What is the IRS 280e Code?
In a few simple lines, the 280e code intends to prevent drug dealers from claiming tax deductions for their business expenses. It was examined and finally put to include state-legal cannabis businesses. The code is: the removal of deductions results in increased taxable income for cannabis businesses and ultimately a nice way of making marijuana companies pay extremely high federal tax rates. It might seem like marijuana companies are thriving and profits are skyrocketing, but that is not the case thanks to this code.
I can't fully pay the amount I owe, what do I do?
There are payment plans available that every company can afford. You might simply qualify for one of several options available below. See the link below:
My business has been reported for a temporarily delay collection, what do I do?
No worries, being currently not collectible does not mean the debt goes away, it indicates the IRS has decided you cannot afford to pay the debt now. Before authorizing your request to delay collection, the IRS may ask you to complete a Collection Information Statement and provide evidence of your financial status. You should know that if the IRS does delay collecting from you, your debt will increase because of penalties and interest until you pay the full amount. During a temporary delay, the IRS will again review your ability to pay. We may also file a Notice of Federal Tax Lien to protect the government's interest in your assets.
Temporary Delays of Tax Collection
I operate a business that consists of selling marijuana. Can I claim deductions to determine my taxable income?
This is what the IRS has to say about that: Internal Revenue Code section 280E disallows all deductions or credits for any amount paid or incurred in carrying on any trade businesses that consist of illegally trafficking in a Schedule I or II controlled substance within the meaning of the federal Controlled Substances Act. This applies to companies that sell marijuana, even if they operate in states that have legalized the sale of marijuana because trafficking marijuana remains illegal. However, Section 280E does not prohibit a participant in the marijuana industry from reducing its gross receipts by its properly calculated cost of goods sold to determine its gross income.
If you do not manage the 280E properly, profits can erode quickly by increased tax liabilities. We help you and your business from wiping out completely. Understanding the implications of the code and partnering with professional cannabis tax advisers is key to operating a law-abiding, profitable cannabis corporation. So, make sure to reach out and ask if you have more questions and we promise to keep in touch and get back to you as soon as possible.
Also, do not forget to check on the events that I will be attending
OCTOBER 7-8, 2022
Friday & Saturday, 10AM – 5PM Jackson Convention Complex
New Jersey Cannabis Investment Expo
Oct. 10-12, 2022
New Jersey Convention Center