The Internal Revenue Service (IRS) hosted a forum on Wednesday devoted to tax policy for marijuana companies and cryptocurrencies.
Presented by a representative from the National Association of Tax Professionals (NATP), the seminar examined topics such as tax deductions allowed while cannabis remains federally illegal, and how different states are addressing marijuana taxation. It also covered issues related to paying taxes on profits in Bitcoin and other forms of digital currency.
The IRS Nationwide Tax Forum panel also discussed growing public support for cannabis legalization and the prospect of federal reform.
#TaxPros, it’s week 5 of the #IRS National Tax Forum 2021. See this week’s schedule for virtual currency, cannabis and compliance reports and more: https://t.co/Ex9h8RuLra #IRSTaxForum pic.twitter.com/ Wu6puGyB1q
– IRS Tax Pros (@IRStaxpros) August 16, 2021
A description of the event stated that attendees would learn to “prepare a tax return for illegal activities” and “determine when to report virtual currency as taxable income”.
Aimed at tax professionals interested in learning more about the crypto and cannabis space, the presentation provided a general overview of some of the financial problems unique to the marijuana industry under the federal ban.
While the vast majority of states have legalized cannabis in some form, its illegal status under the Controlled Substances Act means marijuana companies cannot deduct standard expenses like in other traditional markets under a provision known as 280E, the moderator explained.
However, he stressed that cannabis companies must pay federal taxes even if the business is deemed illegal. And he pointed out that there are limited deductions in the representation of the cost of goods for traders and producers.
A slide from the federal presentation found polls showing a majority of Americans support ending the ban, and it also provided an overview of the economic potential of the marijuana market.
The accountant who chaired the NATP panel further discussed efforts by Senate Majority Leader Chuck Schumer (D-NY) and his colleagues to pass a legalization bill, the draft of which was released last month.
“I think this is a very active topic – and I think it is becoming more and more mainstream,” he said. “If we get laws to regulate now – the question is whether they legalize it – my presentation next year will be very different.”
While the IRS has not spoken out in favor of changing federal cannabis policy, it has stood out as an agency that understands the complications posed by the ban – and has taken steps to clarify taxpayers and financial professionals to understand to find your way around this room.
Earlier this year, IRS Commissioner Charles Rettig told Congress that the agency would “prefer” that state marijuana companies can pay taxes electronically, as the current largely cash-based system under the state cannabis ban is cumbersome and risky for workers .
Former Treasury Secretary Steven Mnuchin said in 2019 that he would like to see Congress approve a bill to resolve the cannabis banking problem, pointing out the fact that the IRS had to build “cashrooms” to collect taxes from these companies as an example of the problem.
IRS released updated tax policy guidelines for the marijuana industry last year, including instructions on how cannabis companies who do not have access to bank accounts can pay their tax bills in large amounts of cash.
The update appears to respond to an internal Treasury watchdog report released last year. The ministry’s inspector general for tax administration criticized the IRS for failing to adequately inform taxpayers in the marijuana industry about compliance with federal tax laws. And it directed the agency to “develop and publish specific guidelines for the marijuana industry”.
The IRS representative of the Small Business / Self Employed Department attended an event on cannabis in December where he noted the ongoing momentum of the legalization movement and said it may succeed in ending the ban in “all states”.
Watch the IRS / NATP presentation on marijuana and cryptocurrency below:
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