IRS debuts initiative to help cannabis companies pay taxes properly

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The IRS launched a program aimed at helping businesses in state-legal cannabis markets pay their federal taxes properly under 280E, the onerous section of the U.S. tax code that disallows standard deductions for such businesses.

The program, titled the “Cannabis/Marijuana Initiative,” was announced on the IRS website and written by De Lon Harris, commissioner of the IRS’ Small Business/Self Employed Examination division.

“The goal of this initiative is to implement a strategy to increase voluntary compliance with the tax law while also identifying and addressing non-compliance,” Harris wrote, highlighting the fact that the IRS website also has a specific information page for those in the cannabis space.

Harris wrote that the new program will entail:

  • More training and job aids for IRS agents conducting marijuana business audits.
  • “Coordination and a consistent approach” by the IRS toward the entire cannabis industry.
  • Figuring out new ways “to identify non-compliant taxpayers.”
  • Collaborating with “external stakeholders” to educate more in the industry as to their tax obligations under 280E.
  • Disseminating more information to those in the industry on how to comply with 280E.

“This is a truly groundbreaking effort for our agency,” Harris wrote.

Harris added that he’s been conducting outreach to those in the industry and has spoken at three cannabis industry events in the past year.

“Through this extended outreach, we hope to help small business owners and others fully understand the unique tax rules before there are any compliance issues,” Harris wrote.

He clarified, however, that “cannabis/marijuana business owners also need to understand that all cash-intensive businesses can be, and are, audited.”