Current Federal Tax Developments

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IRS Publishes Web Page and FAQ with Information for Marijuana Industry

Ed Zollars, CPA

The IRS has published a web page that contains tax information for the marijuana industry.[1]  The page describes its purpose as follows:

A key component in promoting the highest degree of voluntary compliance on the part of taxpayers is helping them understand and meet their tax responsibilities while also enforcing the law with integrity and fairness to all. This article provides general guidance including frequently asked questions for taxpayers in the marijuana industry.

The page contains sections on:

  • IRC §280E and the Marijuana Industry

  • Income Reporting

  • Cash Payment Options

  • Large Cash Amounts

  • Estimated Payments

  • Records

The page ends with a section titled “More Information” which begins with a link to a frequently asked questions page for the marijuana industry.[2]

The FAQ has the following questions on the page:

  • My business is a marijuana dispensary that I operate in compliance with my state’s laws. The federal government considers this an illegal activity. Do I have the same income and employment tax filing obligations as any other business?

  • If I can’t fully pay the amount I owe, are payment plans available that I can afford?

  • What penalties or additions to tax could a participant in the marijuana industry be subject to if adjustments are made during an income tax audit?

  • Will penalties under section 6662 be proposed if an audit ends with the IRS proposing adjustments for a participant in the marijuana industry?

  • I operate a business that consists of selling marijuana. Can I claim deductions to determine my taxable income?

  • What do I need to do for cash payments over $10,000 concerning information returns?

[1] “Marijuana Industry,” IRS website, September 11, 2020, https://www.irs.gov/businesses/small-businesses-self-employed/marijuana-industry (retrieved September 15, 2020)

[2] “Marijuana Industry Frequently Asked Questions,” IRS website, September 12, 2020, https://www.irs.gov/businesses/small-businesses-self-employed/marijuana-industry-frequently-asked-questions (retrieved September 15, 2020)