The Internal Revenue Service (IRS) says it expects the marijuana industry to continue to grow, and it\u2019s offering some tips to cannabis businesses on staying compliant with taxes while the plant remains federally prohibited.<\/p>\n
In a blog post on Monday, IRS\u2019s De Lon Harris said that the \u201cevolving and complex issue my organization has been focused on is the tax implications for the rapidly growing cannabis\/marijuana industry.\u201d<\/p>\n
\u201cThe specific rules and regulations regarding how [marijuana] is taxed at the federal level provides the IRS an opportunity to promote voluntary compliance, not only through audits, but also through outreach and education,\u201d he said, noting the rapid expansion of state-legal cannabis markets. \u201cAnd while there are 14 states that still ban cannabis use, we expect both unlicensed and licensed marijuana businesses to grow.\u201d<\/p>\n
\u201cIt\u2019s tricky from a business perspective, because even though states are legalizing marijuana and treating its sale as a legal business enterprise, it\u2019s still considered a Schedule 1 controlled substance under federal law,\u201d Harris wrote. \u201cThat means a cannabis\/marijuana business has additional considerations under the law, creating unique challenges for members of the industry.\u201d<\/p>\n
The official, who serves as commissioner of IRS\u2019s Small Business\/Self Employed (SB\/SE) Examination division, recognized that the status quo means that marijuana businesses are forced to operate on a largely cash-only basis, and federal prohibition also means that companies in the sector are precluded to taking key tax deductions.<\/p>\n
However, while the tax statute known as 280E means the industry is ineligible for most federal tax deductions and credits, he noted that marijuana firms \u201ccan deduct their cost of goods sold, which is basically the cost of their inventory.\u201d<\/p>\n
\u201cWhat isn\u2019t deductible are the normal overhead expenses, such as advertising expenses, wages and salaries, and travel expenses, to name a few,\u201d Harris said. \u201cI understand this nuance can be a challenge for some business owners, and I also realize small businesses don\u2019t always have a lot of resources available to them.<\/p>\n
The official previewed a new \u201cCannabis\/Marijuana Initiative\u201d the agency is launching that will provide specific job training to tax officials to effectively carry out audits within the industry, ensure that there\u2019s consistency in the IRS\u2019s policy for cannabis, work with stakeholders to ensure tax compliance and help to identify non-compliant businesses.<\/p>\n
\u201cI\u2019m very focused on the success of this strategy because it\u2019s very important for business owners to understand that under our nation\u2019s tax laws, and specifically Internal Revenue Code 61, all income is taxable, even if someone is running a business that\u2019s considered illegal under federal law,\u201d he said<\/a>. \u201cThis is a truly groundbreaking effort for our agency.\u201d<\/p>\n \u201cOur strategy is not limited to pushing information out via our website in the hope that business owners will find it. I\u2019ve made it a priority for my SB\/SE organization to engage with the cannabis\/marijuana industry through speaking events and other outreach. I have done three of these types of events over the last year, and what I have heard is a genuine desire to comply with the tax laws regarding the industry. Through this extended outreach, we hope to help small business owners and others fully understand the unique tax rules before there are any compliance issues.\u201d<\/p>\n \u201cSince the unique circumstances of the cannabis industry can make tax preparation challenging, I hope that new and experienced business owners take my advice in this post and use our resources to ensure they understand their tax obligations and avoid penalties associated with non-compliance,\u201d the blog post concludes. \u201cWe\u2019re always here to help with tools, information and guidance.\u201d<\/p>\n This is yet another signal that while marijuana remains federally illegal, agencies are increasingly recognizing that a policy shift is happening in states and may well be on the horizon at the congressional level.<\/p>\n As leadership in the House and Senate work to advance legislation to deschedule cannabis, lawmakers have also pushed to enact clear, statutory protections for financial institutions that work with state-legal marijuana businesses. And that would be accomplished through House-passed standalone legislation<\/a>,\u00a0or an amendment that was attached to a defense spending bill<\/a>\u00a0this week.<\/p>\n In the interim, banks and credit unions are operating under 2014 guidance from the Financial Crimes Enforcement Network (FinCEN) that lays out reporting requirements for those that choose to service the marijuana industry. FinCEN released a report last week showing that there were 706 financial institutions that said they were actively serving cannabis clients<\/a> as of the last quarter.<\/p>\n IRS separately hosted a forum last month dedicated to tax policy for marijuana businesses<\/a> and cryptocurrency.<\/p>\n The seminar, which was presented by a representative of the National Association of Tax Professionals (NATP), examined issues such as allowable tax deductions while cannabis remains federally illegal and how different states approach taxing marijuana. It also covered issues related to paying taxes on earnings in Bitcoin and other forms of digital currency.<\/p>\n Earlier this year, IRS Commissioner Charles Rettig\u00a0told Congress that the agency would \u201cprefer\u201d<\/a>\u00a0for state-legal marijuana businesses to be able to pay taxes electronically, as the current largely cash-based system under federal cannabis prohibition is onerous and presents risks to workers.<\/p>\n Former Treasury Secretary Steven Mnuchin said in 2019 that he\u2019d like to see Congress approve legislation resolving the cannabis banking issue and he pointed to the fact that\u00a0IRS has had to build \u201ccash rooms\u201d to deposit taxes<\/a>\u00a0from those businesses as an example of the problem.<\/p>\n IRS released\u00a0updated guidance on tax policy for the marijuana industry<\/a>\u00a0last year, including instructions on how cannabis businesses that don\u2019t have access to bank accounts can pay their tax bills using large amounts of cash.<\/p>\n The update appears to be\u00a0responsive to a Treasury Department internal watchdog report<\/a> that was released earlier in the year. The department\u2019s inspector general for tax administration had criticized IRS for failing to adequately advise taxpayers in the marijuana industry about compliance with federal tax laws. And it directed the agency to \u201cdevelop and publicize guidance specific to the marijuana industry.\u201d<\/p>\n Harris\u2019s predecessor at IRS SB\/SE also participated in an informational webinar in December, offering candid insights on a variety of cannabis industry issues<\/a> from the federal perspective.<\/p>\n Marijuana Arrests Dropped Sharply In 2020 As Both COVID And Legalization Spread, FBI Data Shows<\/a><\/p>\n<\/blockquote>\n\n The post IRS Official Offers Tax Advice To Marijuana Businesses And Says Feds Expect Industry To Keep Growing<\/a> appeared first on Marijuana Moment<\/a>.<\/p>\n
The Internal Revenue Service (IRS) says it expects the marijuana industry to continue to grow, and it\u2019s offering some tips to cannabis businesses on staying compliant with taxes while the plant remains federally prohibited. In a blog post on Monday, IRS\u2019s De Lon Harris said that the \u201cevolving and complexContinue Reading<\/a><\/span><\/p>\n","protected":false},"author":458,"featured_media":0,"comment_status":"false","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[18,81],"tags":[],"_links":{"self":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/50185"}],"collection":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/users\/458"}],"replies":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/comments?post=50185"}],"version-history":[{"count":1,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/50185\/revisions"}],"predecessor-version":[{"id":50186,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/50185\/revisions\/50186"}],"wp:attachment":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/media?parent=50185"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/categories?post=50185"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/tags?post=50185"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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\nRead More: IRS Official Offers Tax Advice To Marijuana Businesses And Says Feds Expect Industry To Keep Growing<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"