On April 12, 2021, the Marijuana Business Journal published an article providing additional detail on the extent the IRS will push through to collect extra taxes from Cannabis businesses.
The article provides some startling information on IRS tactics being developed to collect additional revenue from cannabis business as mandated by 280E regulation, such as looking at utility costs to try to gauge the amount of plant grow that may be produced.
A key take away is if summons for an IRS first interview, assume the auditor has extensive knowledge on you and your business. It may be wise to retain professional advice before going into that first interview as the IRS will be phishing through every possible avenue to audit further if they believe there is missing tax revenue to gain.
Several IRS documents were referenced within this article, one being a 135-page internal IRS training guide. In reviewing this guide, it reveals the IRS going through a lengthy discussion over what to look for if a second business was set up to purely mitigate paying taxes; they will assess if the business was set up for income or profit and the degree of separation from the primary Cannabis business. The underlined principle here is to maintain a complete separation between businesses, which is necessary along with separate books and records. If there is ambiguity the auditor may reject that separate business.