IRS commissioner makes suggestions for hashish firms

A long-time Internal Revenue Service (IRS) official recently attended a webinar offering recommendations on how cannabis companies can stay tax compliant.

The IRS Commissioner of Small Business / Self-Employment (SB / SE) Examination, De Lon Harris, attended a PBC webinar along with PBC CEO and Co-Founder Josh Radbod on Wednesday. There he discussed the issue of how cannabis companies can continue to be compliant despite cannabis’ federal status.

“It really is our mission at the IRS, not just with the marijuana and cannabis industry, but with all taxpayers to promote voluntary compliance,” Harris said during the webinar. “And that can be done in different ways. When most people think of IRS, they think of reviews or audits, and they think that is the only way we interact or try to encourage taxpayer voluntary compliance, but we also do our fair share of public relations as well Education. Just like what we’re doing today. ”

The PBC Conference is a B2B event dedicated to “Payments, Banking, and Compliance in the Cannabis Industry”. Harris was also a keynote speaker at the 2021 PBC conference, held September 9-10, 2021.

Harris also spoke about the IRS’s goal to reduce audits for the cannabis industry. “With regards to the cannabis marijuana industry, we have developed a strategy that we hope will increase voluntary compliance and identify and address violations when they exist,” Harris said.

“Our focus is on positively influencing compliance with filing and payment and reporting requirements for all cannabis companies to keep audits to a minimum.” On the IRS side, Harris noted that they are trying to train their examiners appropriately with it they can perform a quality check that the various cults of the IRS are communicating properly with one another and that they continue to work with groups like the PBC to promote education.

When asked key questions during the webinar, Radbod Harris shared that as a List I controlled substance cannabis stats does not mean that taxes should not be paid. “As I’m sure you know, and anyone who is listening, a business that deals in the sale or production of marijuana or cannabis is illegal under federal law, but nonetheless, it is a business in the true sense of the word, regardless of whether it is it is categorized. “is classified as legal or illegal under federal law, it remains obliged to pay federal income tax on the taxable income that it generates.”

The Internal Revenue Code 280E complicates matters and prevents companies that sell cannabis from receiving tax deductions, even if those companies operate legally in states that have legalized cannabis sales. However, this section allows cannabis “to reduce its gross income by properly calculating the cost of goods sold to determine its income”. While a cannabis company cannot deduct advertising or sales expenses, it can reduce gross income according to internal income code 471.

Harris strongly advised cannabis companies to keep a record of their receipts, canceled checks, and any other documents supporting proof of income. “Well-organized records make it easy to prepare your tax return and help you respond when your tax return is selected for review by the IRS.”

Harris stated that all of this and more is available on the IRS website; However, users will have to search for “marijuana” to find information instead of using the keyword “cannabis” first.

“So we’re making that change, but right now you would type in ‘marijuana industry’ and it would open the page where we give you information, not just general information, to help you understand and understand the tax obligations required meet from the cannabis industry but the page that contains links to pages with more specific information, ”he concluded.

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