If you own a cannabis business and have tax debt with the IRS resulting from a notice under Section 280E of the Internal Revenue Code, you are most likely bracing yourself for what is coming next. The IRS collection process can be confusing and downright scary for someone who has never gone through the process.
However, receiving a 280E notice is not necessarily a death sentence for your business. Other cannabis businesses have also been penalized by Section 280E and have survived or even thrived.
What is Section 280E?
Companies that grow, produce, or sell Schedule I or II controlled substances are generally prohibited from deducting necessary and ordinary business expenses under Section 280E of the Internal Revenue Code. This prohibition has primarily affected the cannabis industry, as marijuana remains a Schedule I drug under the federal Controlled Substances Act. However, its sale is legal in a majority of states.
Many companies have been tripped up by a so-called 280E notice, and these companies have been forced to incur larger tax burdens and amend previously filed tax returns as a result of their inability to deduct certain expenses.
How Can My Business Survive Section 280E?
Every tax situation is unique, and it is crucial to consult a tax professional like those at the Highland Tax Group. The following are several tips to help your business survive a Section 280E tax liability:
- Manage your tax obligations through such methods as segmenting business operations and filing protective tax refund claims
- Increase operating efficiency by reducing overhead and streamlining processes
- Look into innovation or creative legal and/or tax strategies to structure your business in the most tax-efficient manner
Contact the Highland Tax Group If You Have Received a 280E Notice From the IRS
Do not ignore the IRS if you have unpaid tax debt. You may be subject to asset seizure and tax liens. The tax professionals at the Highland Tax Group will review your tax situation and, in many cases, will be able to obtain a favorable outcome from the IRS. Contact us today.