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,...
2021 is already shaping up to be a historic year for Cannabis, on the heels of the huge growth and developments the industry experienced in 2020. From skyrocketing sales amid the pandemic to five new states welcoming legalized Cannabis in the November elections, the industry is poised for big changes on the horizon.
Now, with the recent Senate power shift and the House voting on the MORE (Marijuana Opportunity Reinvestment and Expungement) Act, Cannabis may finally be removed from its Schedule 1 classification. At the very least, the pace at which new states continue to legalize marijuana is a harbinger that federal legalization is in the not-so-distant future.
With all this excitement and growth, here’s the thing: regulations are still tightening and the IRS is ever-sharpening its vigilance, winning nearly every court case filed. Even if Cannabis was de-scheduled, the industry would still need to do GAAP accrual accounting and accountants will still need to know how to...