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| Joseph Bailey, CPA |
If you are reading this, you likely have been
hit with the infamous 10% "cash penalty" from the IRS. The below information should be very helpful to you, but please note it is for illustration only as the IRS abates penalties on a case-by-case basis. I am not saying your specific penalty/interest will be abated. (Sorry, making sure I don't get cranky emails from people later!)
With the lack of access to banking, many
cannabis companies are forced to operate solely in cash, and this includes
making tax payments.
Hopefully, you already read my post on how to pay your taxes in cash. If not, take a look. In that post I
mentioned that if you are declined by banks, that you should keep those
letters. Well, here is why.
When assessed with the IRS 10% cash penalty
applied to companies who do not use the required Electronic
Federal Tax Payment System (EFTPS) you may be able to have the penalty abated by showing that you
are "unbankable". This was the case for Allgreens v. US in which case the cannabis company was able
to have the penalties dropped. The IRS then made some changes to their Internal Revenue Manual wherein they provided some guidelines on
having the penalty removed.
Okay Joe, great background, now let's get to
the meat and potatoes! How do I attempt avoid the 10% IRS cash payment penalty
already?! Please note that there was no precedent set in the Allgreens case,
these cases are handled on a case-by-case basis, and you may or may not be able
to get your penalty removed. But what is the harm? If it doesn't work, you
already owed the penalty. If it does work, it can save you thousands of dollars
of unnecessary penalty payments.
1. Apply for bank accounts every year. The
Feds will allow up to 2 years, but it is in your best interest in a few ways to
try and obtain bank accounts regularly. One, you may just get a good bank account
and avoid all of this. Two, an annual (or even better semi-annual) attempt at
obtaining banking shows a consistent attempt on your part. The IRS doesn't
remove this penalty for people who just decide to not try and get an account,
so keep that in mind.
2. Have a qualified CPA draft you a letter
response to the IRS.
3. SIGN the declaration letter.
4. Send in the signed letter along with any
and all documentation showing your attempts to obtain legal banking.
5. Cross your fingers!
For assistance, email info@B-Cconsulting.com and visit BC Consulting website
