4 Things Cannabis and CBD/Hemp Accountants Need to Know About 471 (That Will Save Your Clients Money and Frustration)

280e 471-11 irc 471 Jan 05, 2021

Cannabis companies are springing up across the country, and for good reason. There is a huge opportunity for growth in this market and businesses are just scratching the surface. However, it’s your job to be the expert on the numbers and the complicated rules to stay ahead of the game and keep your clients moving forward.

Despite the many opportunities in the industry, Cannabis companies face certain challenges due to its federally illegal status, especially in regards to tax liabilities. CBD/hemp companies can deduct normal business expenses, but must proceed with extreme caution as they are still highly regulated and often audited. Both niches require complex accounting and tax processes to stay compliant.

According to 280E, any business associated with the “trafficking” of Schedule 1 substances may not deduct ordinary business expenses (i.e. rent, vehicle expenses, mortgage interest, and much more). The only way Cannabis companies can lower taxable income is by...

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