National Law Review Article: Cannabusinesses Should Take Advantage of Their Extra Time to File Tax Returns to Ensure Proper Reductions in Their Taxable Income for Cost of Goods Sold

National Law Review Article: Cannabusinesses Should Take Advantage of Their Extra Time to File Tax Returns to Ensure Proper Reductions in Their Taxable Income for Cost of Goods Sold

Article dated: Wednesday, March 25, 2020 Due to the COVID-19 virus-related filing and payment extensions recently announced by the U.S. Treasury Department and IRS, taxpayers now have an additional three months until July 15, 2020 – to prepare and file their 2019 federal income tax returns. Cannabusinesses of all types, particularly those involved in the manufacture and purchase of products for resale, should use their extra tax planning time to review their 2019 expenses with their tax preparers to ensure they are reducing their taxable income as much as legally permissible, given the ongoing disallowance on business expense deductions imposed by Section 280E of the federal tax code. Cost of Goods Sold for Cannabusinesses As this blog has covered in the past, while the IRS and courts continue to severely curtail cannabusinesses’ general expense deductions under Section 280E, companies in the cannabis industry may (and should as a matter of tax law) exclude their cost of goods sold (COGS) from their gross receipts and taxable income. Thus, depending on your type of cannabusiness involved (e.g., a cultivator versus a consultant), properly distinguishing your COGS from other general business expenses on your tax return for 2019 could result in a substantial reduction of your taxable income that the IRS might otherwise disallow if all proper COGS items are not separated from general business expenses. Section 280E of the Tax Code The cannabis industry’s long-running—and losing— battle against the IRS to permit deductions for all of a cannabis-related company’s ordinary and necessary…

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Source : CANNANNEW REPORT
Link to original : National Law Review Article: Cannabusinesses Should Take Advantage of Their Extra Time to File Tax Returns to Ensure Proper Reductions in Their Taxable Income for Cost of Goods Sold
reposted by Cannabis News World

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