280E & Tax

Tax Planning and Why It's Important

Preparation is history; planning is strategy

A tax return is a report card on decisions already made. By the time it is prepared, the year's outcome is fixed. Planning works on the other side of that line — arranging entity structure, cost recording, timing, and capitalization during the year so the eventual return has better numbers to report.

Why the stakes are higher in cannabis

Under 280E, your taxable income is determined less by what you earned than by how your costs were classified as they occurred. A producer who capitalizes production costs correctly all year and one who sorts it out in March can have identical operations and very different tax bills — and only one of them has documentation that holds. Planning in this industry is not a refinement; it is the main event.

What a planning relationship looks like

Quarterly projections so the liability is never a surprise. A capitalization methodology reviewed and applied consistently. Entity structure revisited when the business changes. Year-end moves evaluated while there is still a year to move in. This is the difference between a firm that files your taxes and one that manages them.

This article is general information, not tax advice.