Many cannabis operators still run primarily cash businesses, which creates a challenge when it comes to everyday things like paying employees, purchasing inventory or buying new equipment. It’s a big problem in tax season, too. For 2020, cannabis businesses will pay nearly $3 billion to the IRS, and many will actually make those payments in cash. Even those working with local credit unions or banks can run into hurdles with taxes if they can’t send payments online or easily reconcile transaction records.
It’s hard enough to navigate the IRS rules when you’re in the cannabis industry. Due to the consequences of 280E, the IRS is now actively going after cannabis businesses for audit. (You and your accountant should review the internal IRS documents uncovered by MJ BizDaily pertaining to the IRS targeting the cannabis industry.) But if you are dealing in cash, or have a piecemealed financial management system, it’s costing you more time and money to figure and pay your taxes in a timely manner. The most notable expense is that the IRS charges a 10% penalty for businesses that don’t pay through the Electronic Federal Tax Payment System (EFTPS).
Your financial provider should be helping you save time and money when filing. The first step is by giving you transaction data electronically. Whether through direct connection or a batch download, both solutions are better than you or your accountant searching through PDF documents or mailed statements. Spreadsheet exports can sync to your accounting systems or be sorted and filtered as needed to get to the numbers.
The second is ensuring you can easily pay the bill. The primary way to pay the IRS is through the EFTPS. The best way is to schedule the payment using the EFTPS using your routing and account number, but you can also send your taxes the same day by wire transfer if absolutely necessary. If you aren’t enrolled in the system already it may take a week or two to get set up initially, so plan accordingly.