Are you increasing your odds of triggering an IRS audit? Are you unsure if you are? Many companies think they are following best practices, but are they? Here are a few items that you will want to double check to ensure you are not triggering an audit.
⚠️ Dumping everything in the Cost of Goods Sold. Many businesses are trying to
find a way around 280e, including "dumping" all the expenses into the Cost of
Goods Sold, but this doesn't work! Along that same line, creating different
entities for cannabis vs non-cannabis business is not a great idea either.
Having multiple entities (Management vs Cannabis entity) does not mean that
280e will not apply to the entire business, not the entities. The IRS looks at the
business, not the entities.
⚠️ Having higher deductions than is expected. This would include trying to go
around 280e, as you are not able to deduct expenses. Some of the business
expenses that are closely looked not accounted for correctly would include:
💣Utilities (electric, internet, phone, etc)
💣Health Insurance Premiums
💣Rental fees for facilities
💣Routine repair and maintenance
💣Payments to Contractors.
⚠️ Commingling personal and business accounts. This is why it is important to
keep your books clean! If they see that you are commingling your books, that
will open you up to a personal audit also. Just don't do it.
⚠️ Unpaid employment taxes. This means don't rob Peter to pay Paul when it
comes to tax money. The IRS will be looking for that, so don't assume that you
can "pay back" the money you "borrowed" from other accounts.
⚠️ Late or unfiled tax returns.
If you want to know more, contact us today. Don't let this drag on, the more time you wait to fix your accounting, the higher the likeliness of an audit.