Section 280E of the Internal Revenue Code generally prohibits companies trafficking Schedule I or II controlled substances from deducting necessary and ordinary business expenses. For years, this limitation has put growers, producers, and sellers of cannabis at a severe disadvantage compared to other industries, as these companies have paid significantly higher taxes comparatively.
What Should I Do If I Get a 280E Audit Adjustment Notice?
If you receive a Section 280E audit adjustment notice from the IRS, your first course of action should be to closely examine it in order to understand the adjustments made and the reasons why they were made.
Section 280E provides that necessary and ordinary business expenses are not deductible. These expenses include:
- Rent for your place of business
- Wages paid to your employees and contractors
- Marketing expenses such as signage and advertising
- Expenses related to the upkeep of your property or vehicles
Once you receive the notice, you will likely have to amend any previously filed tax returns and recalculate your tax liability for those years. Depending on the amount of taxes owed, payment of penalties and interest may be required.
If you believe that the IRS erred in sending you the Section 280E notice and disallowing the deductions, contact the Highland Tax Group immediately for help. We can advocate to the IRS on your behalf and push for the notice to be rescinded if warranted.
It is critical that you take prompt action to ensure that your tax liabilities are paid in full and you comply with federal tax laws. The Highland Tax Group can help you clean up any past tax issues and with tax planning for future years.
Contact the Highland Tax Group if You Have Received a Section 280E Notice
The loss of deductions under Section 280E could have grave consequences for your business. If you do not have the funds to pay your taxes, you may be subject to asset seizure and tax liens. Please contact a member of the Highland Tax Group so that you do not face the IRS alone.