February 27, 2017
There are quite a few benefits to running a cannabis business, like helping people in need and taking part in a very important turning point in US history. While many things have changed in regards to the retail sale of recreational marijuana, it seems that it’s still not recognized under federal law. Because of that, it poses various challenges to those working in cannabis accounting.
No banking access
The cannabis industry is growing and with more than 28 billin dollars generated in tax revenue in ’16, it’s clear that these businesses are making a lot of money. However, getting a bank account as a cannabis business is very challenging. While some businesses may be recognized at state level, they cannot deposit their money into a bank. Because of that, there’s a lot more susceptible to audits, safety threats, and robbery.
Lack of business tax deductions
There are a number of laws that the IRS imposes on cannabis businesses and these regulations and laws need to be respected to a T. One of those laws though says that no tax credit or deduction can be provided to businesses that traffic illicit substances that are banned under federal law. While in the past it was possible to deduct expenses related to selling cannabis, that is no longer possible today.
Uncertain IRS audits
Surviving tax audits is yet another challenge that cannabis accountants have to deal with. Since the federal government doesn’t such recognize such businesses, they’re usually prone to IRS audits. Since audits can shut down cannabis businesses, hiring a good CPA is a great way to prevent this from happening.