While no one dances at the thought of preparing their taxes, cannabis businesses have an even greater reason to shy away. Being in an industry that’s still federally illegal presents a unique level of complexity and risk. These legal challenges can be frustrating. But don’t let your fear keep you in paralysis. The better prepared you are to handle cannabis accounting and compliance, the more you’ll safeguard your business against fines and penalties.
Here are three tips to help you prepare for tax season:
1. Choose an accountant familiar with the cannabis industry.
This is a necessity. You cannot work with just any accountant. Your accountant must understand the complex needs of cannabis businesses. Do they stay up-to-date on laws associated with cannabis? How familiar are they with Internal Revenue Code Section 280E? Do they know your state’s marijuana mandates? These are all questions you should ask a potential accountant. (READ: Why You Should Consult with a Marijuana Accountant?)
2. Keep great records.
You must keep great records. In the cannabis industry, this is a priority in order to legitimize your business. Make sure you can prove without a doubt that you are following local laws and your revenue is generated from legitimate business activities. For example, if you operate a dispensary, keep records that prove your sales comply with all applicable state laws.
3. Know the law.
You can have the best accountant and the best record keeping software, but if you don’t know the laws, you put your business in jeopardy. Federal and local laws not only affect how you file, but also how you operate your business day-to-day. Cannabis is an evolving industry. Stay informed and ensure all other areas of your business are federally compliant. Following these tips will help ease the tension of tax time.
Do you have the right data to make tax time easy? Talk to one of our experts today.