An auspicious tax season awaits marijuana professionals who prepare with these three actionable tips.

There are multiple moving parts to keep track of in addition to running your day-to-day business — it’s easy to feel overwhelmed. Here’s what you need to know to be prepared for tax season.

What is 280E?

One reason taxes can be such a headache for cannabis business owners is IRS Code 280E. This federal statute forbids companies from deducting business expenses for gross income associated with the trafficking of Schedule I or II substances, as outlined by the Controlled Substances Act. While cannabis remains a Schedule I substance in the eyes of the federal government, businesses are stuck navigating these tricky tax circumstances.

A bit of history: 280E was created in 1982 following a court case in which a convicted cocaine trafficker asserted his right under federal tax law to deduct ordinary business expenses. The Reagan administration decided it needed to prevent future traffickers from following suit and created 280E.

280E still penalizes cannabis businesses, even when they are regulated and comply with state law. Where other businesses may be able to deduct things like employee salaries, rent, equipment, and electricity, cannabis businesses can only deduct expenses that directly relate to making a profit — the cost of goods sold (COGs). Cannabis companies must pay tax on gross income, which can be as high as 70 percent.

Not giving enough attention to tax preparation and documentation can easily result in racking up interest, penalties, and fees. Plus, there’s a higher chance that your business will be audited. MJBizDaily data found 6.3 percent of marijuana businesses were audited in 2015, higher than average business at 1.4 percent. These are serious consequences – and have been known to take a business out overnight.

Staying informed can help your business save money this tax season. Here’s what you need to know.

Go to: https://www.thehour.com/business/article/Three-Ways-Cannabis-Businesses-Can-Save-Money-14956274.php