As tax extensions are coming due, we wanted to share some ‘insider’ thoughts about choosing a CPA to prepare your cannabis business tax returns.
Over the past 45 days, our team has been increasingly getting on calls with cannabis operators that chose to go with a local, generalist CPA firm and are getting burned badly.
One of the common threads in the conversations that were are having is that local CPAs are waiting until the last minute to deliver tax returns.
When these returns are delivered at the last minute by a local CPA, the cannabis business owners are EXTREMELY shocked to see what their exposure is. $10k, $25k, even $100k+ tax bills that they did NOT see coming!
Now, because most local CPAs don’t have experience in cannabis, they just ‘plug & chug’ the numbers that you give them. They don’t take into consideration potential 280E allocations, 1-471, time tracking, transaction coding, etc…
This mistake on the generalist CPA’s part could create a huge mess for cannabis business owners that know taxes are one of the biggest hurdles to success in the industry.
Examples of This Tax Mess
You’re seeing this generalist CPA mess in Oklahoma and many other ‘younger’ cannabis markets, and it’s a function of greedy, ignorant CPA firms and inexperienced operators not knowing any better.
For example, on August 31st, Marko and Lawrence hopped on a call with an operator who was literally breaking down crying. She was told by her local, generalist CPA that she had a $25,000 tax bill due in a few weeks.
But, within minutes of combing through her QuickBooks and asking a few pointed questions, our audit partner, Marko Glisic, showed the operator that her tax bill could most likely be reduced down to around $10-15K.
Just like that, one call with our team and a potential 40% reduction in her tax bill. Probably her most profitable business call all week!
Here’s a different example from the CPA firm perspective. One of these local/generalist CPA firms was so shocked and appalled at the dispensary’s tax return and their tax liability, that the firm didn’t even charge the dispensary a tax prep fee.
Now, this info is not meant to instill fear, but to bring awareness to how important it is to work with an experienced, cannabis-industry CPA if you want to be in the best tax position possible.
You wouldn’t go to a personal injury attorney for help with a patent infringement case, so why in the world would you go with an oil/gas CPA to work on your cannabis-industry taxes?
CPAs are Investments
Now, we know it’s no secret, GreenGrowth CPAs is not the cheapest when it comes to tax preparation fees. Our real value is in what we can save you on your taxes when you leverage our cannabis industry experience.
Here’s an abbreviated back of the envelope calculation.
Option 1: Local/General CPA
- Tax Prep Fee: $750
- Your Tax Bill: $25,000
Option 2: GreenGrowth CPAs
- Tax Prep Fee: $1,950
- Your NEW Tax Bill: $20,000
- Your Tax Savings: $5,000
- ROI: 416%
What this is trying to illustrate is that yes, with a general CPA, you can save on the initial prep fees and will feel like you’re getting a deal when you compare them to our prices. But you’re more likely to have a bigger tax bill with that generalist CPA.
With GreenGrowth CPAs, it is a bit more upfront costs on preparation, but you are more likely able to unlock incredible tax savings because we actually know what we are looking for and how to help your specific type of business.
These tax savings we find for your cannabis business are something that you can take advantage of EVERY YEAR. And the more revenue you generate, the higher the potential tax savings we can recapture for you.
So think about it...where else can you invest money and get back a 3x, 5x, or even 8x return on your investment?
But I already filed my taxes!
Great, glad you’re punctual with your returns! Smart move.
If that’s the case, then let us do a check-up to see if we can file an amended return to get you back some of the money you spent on taxes.
An example of something we find that most generalist CPAs didn’t take advantage of for their cannabis clients this year is the change to depreciation from the CARES Act.
Here’s how it works…
If you had major capital expenditures (which 99% of cannabis businesses do), then you could depreciate the value to $0 immediately and reduce your taxable income, ultimately reducing your tax bill.
And there are many ways we can help recapture value for you and your cannabis business, but you have to contact us so we can look into your specific situation.
Also, know that we don't just prepare taxes. We have an entire suite of services that we offer for cannabis businesses from monthly CFO service all the way to helping take your company public if that's your goal.
Here's a short video on the benefits & process of working with GreenGrowth CPAs for your tax preparation.
If you want to iron out your taxes or get a second opinion about your cannabis business filings, then please reach out to our team today and schedule a call.
A 15-minute phone call could save you thousands of dollars on your taxes, year after year.