Tax Attic: Topics of seminar tax season

For members of the Michigan Chapter of the National Association of Tax Professionals, the seminar tax season officially starts on Thursday, May 17 with our two-day spring conference. I know two full days of listening to instructors talk about income tax doesn’t sound very interesting but if you happen to be involved in the tax business, like I am, it really can be quite interesting. The 2018 seminar season will officially end on Friday, January 5, 2019 with a seminar we call The Last Chance. In between, there will be several daylong seminars along the way from May and January. By January, we plan to have the entire Tax Cuts & Job Act of 2017 thoroughly analyzed and hope to better understand several other topics as well. Even if we don’t have the TC & JA “thoroughly analyzed “, we will know the new rules better than if we had not put in the time and effort through-out the summer and fall. The “several other topics” will be determined during the summer. Right now, two topics of interest are first, how and if tax professionals can help marijuana tax businesses comply with the tax laws and second, better understanding the filing of fiduciary estate and trust returns.

In light of the fact it appears that this coming November Michiganders will be voting on making the recreational use of marijuana legal, perhaps the first topic on how to help marijuana tax businesses comply with federal tax laws will be a big draw. I have read a number of articles on this topic and helping these types of businesses is full of problems. Since marijuana is considered a Schedule 1 narcotic and, therefore, illegal at the federal level, it is not recommended to help in the tax preparation process. Period. Tax professionals, such as Enrolled and CPA’s, operate under the rules as laid out in the Department of the Treasury’s Circular 230. That being said, there are other rules that must be followed that are not within the provisions in Circular 230. For example, the Bank Secrecy Act (BSA) has several rather onerous provisions that, if not followed, could result in incredibly large fines and penalties. “Large fines” could total to over one hundred thousand dollars with no annual limit. Yikes! In addition, the Financial Enforcement Network (FINCEN) has a multitude of regulations that must be followed. Let’s take a quick look at the BSA and the FINCEN rules.

One of the biggest problems with marijuana businesses is that ultimately, they are cash businesses. As such, all of the Anti-Money Laundering (AML) laws also come into play. One of these laws involves the Suspicious Activity Report or SAR that a bank uses to report a suspicious deposit or transaction to the Treasury Department. For a marijuana business, the bank must file a SAR for every deposit that is made. Yes, that is correct. Every deposit, no matter the amount, big or small, is considered a suspicious transaction and the bank has to fie a SAR. In addition, if the marijuana business is large enough, it may have to file a FinCEN Form 8300 for individual transactions or a group of related transactions that equal or exceed $10,000. This most likely means that the marijuana business that pays it’s monthly rent in cash will force the landlord to file the Form 8300. Ultimately, the constant use of the SARs and the Form 8300s will result in a visit from the IRS along with a corresponding location audit. Constant compliance issues and frequent audits are two of the reasons that make it a complicated decision as to whether to enter the marijuana business. I can only imagine what the profits are in a marijuana business if the business is willing to jump through the BSA and FINCEN rules and regulations. Good luck to them. This is Jerry Coon signing off.

Jerry Coon is an Enrolled Agent.

He owns Action Tax Service on Northland Dr in Rockford.

Contact Jerry at www.actiontaxervice.com