How Poor Bookkeeping Cost Altermeds Over $78K in Penalties

Poor Bookkeeping Cost Colorado Dispensary over $78k in Penalties

When it comes to cannabis record-keeping, not every dispensary wants to spend the fees on an accountant specific to the niche. That’s what happened to one dispensary owner in Colorado, who owes $391K in tax deficiencies and an additional $78K in accuracy-related penalties.

But how exactly did this happen?

According to the notice of deficiency for tax years 2010 and 2011, the IRS found poor record-keeping, lack of check registers, no physical inventory counts, reduction of COGS, and the denial of ordinary and necessary business expenses were more than enough to penalize the dispensary.

In Altermeds, the Tax Court upheld the imposition of a 20% tax penalty on the taxpayer for the underpayment of the tax liability resulting from the deductions taken. Various medical and recreational marijuana practices have been legalized in the majority of the states; however, the last major hurdle, the Section 280E prohibition,...

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$78k in Accuracy Penalties for Cannabis Company for Poor Accounting and Record Keeping

IRS found that due to poor record-keeping, lack of check registers, no physical inventory counts, incorrect Cost of good sold allocations and much more caused $78k in penalties

The Tax Court in Alterman upheld the imposition of a 20% tax penalty on the taxpayer for the underpayment of the tax liability resulting from the deductions taken. Various medical and recreational marijuana practices have been legalized in the majority of the states but the last major hurdle, the Section 280E prohibition,  still keeps marijuana ultimately classified as a Schedule I controlled substance under federal law.

Attorney Henry Wykowski explains, “Nevertheless, it’s a disappointing case and illustrative of the difficulties the industry faces with many – but not all – of the judges in tax court.”

What does this mean?

Watch our Altermeds Case Review HERE to learn how you can avoid running into these issues!

If a business is operating without keeping good...

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