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What to keep in mind for a cannabis tax audit

On: March 20, 2020

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A cannabis tax audit can come at any time to any cannabis business, which makes being prepared a necessary component to keeping your business alive. While there are some obvious steps you can take to keep yourself safe, like keeping everything legal and by the book, there are other simple techniques that will go a long way. Going through a cannabis tax audit isn’t scary, but it is something that you should always keep on your radar. How to prepare for a cannabis tax audit Being prepared for anything is a good frame of mind to have as a business owner, but sometimes life gets in the way. Creating a solid record-keeping system of all the invoices, receipts, expenses, and purchases, among other things, will go a long way when you are dealing with an audit. Not only will you most likely have to submit these items, but California state law requires you to keep records from at least four years ago to now, so it is better to figure out a system now. By establishing a solid record system, you will not only be able to pull up any information you need with a quickness, but you will probably be less stressed in the long run. Another tip that you should follow is getting an accountant, as they can relieve the stress and keep everything on and by the books in case of a cannabis tax audit. If you are about to go through an audit, you may want to seek the services of a tax lawyer or CPA who has experience going through them, as they can guide and keep you from getting any hefty fines if you don’t know what you are doing. Things to keep in mind for a cannabis tax audit One of the first things you should remember about being audited is the person auditing you is not your friend. Even they seem happy and sociable, they are doing their job, which could get you in a lot of trouble if you don’t follow the correct protocols when it comes to audits. There is the implicit bias that you did something wrong if you are being audited, so taking precautions is necessary. Don’t freak out, as it looks suspicious, and you shouldn’t act like you did something wrong unless you did something wrong. Don’t offer any extra information unless you are asked by the auditor, as a quick routine check-up could become much bigger if they get curious about something you mentioned. Trying to stay out of a bigger ordeal isn’t a bad thing, as long as you aren’t breaking the law. If you know you are about to be going through a cannabis tax audit, reaching out to others who may have gone through the same thing can also be a big help, as they can talk you through and give you an idea of what you are going to be asked about when the time comes. Being audited isn’t the end of the world, but being prepared can keep your world from falling apart. And always make sure to call Leading Tax Group and don’t attempt to do it yourself.
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