A Reimagined IRS Under President Donald Trump And Elon Musk – What Should Taxpayers Do Now?

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It is no secret that the IRS is under scrutiny by DOGE and that changes are to come to the IRS.  As we all have to file tax returns, pay taxes and be subject to enforcement of the tax laws, now is the time to prepare and seize opportunities to save.

Advantages To Filing A 2024 Tax Return – Getting Money Due To You

Most people must file a federal tax return. Some people with a lower income are not required to file. However, these individuals should still consider filing for a refund of federal income tax withheld and especially if they are also eligible for certain tax credits, like the earned income tax credit.

Your 2024 Federal individual income tax return is due April 15, 2025; however, if you are located in a declared Federal disaster area, you could have additional time without the need to file an extension.

Remember, until a tax return gets filed, the IRS cannot work on processing your claim for a refund of any overpayment and for this tax season you should do what you can to accelerate the filing of your 2024 tax return to avoid potential processing delays.

The soonest delay could come from layoffs and resignations of IRS personnel that have already occurred or are anticipated.  Another potential delay is that if Congress does not take action by March 14, 2025 to keep the government running, we could be facing a government shutdown.

Here are four things to consider when determining whether to file a 2024 tax return:

  1. Tax withheld or paid–
  • Did your employer withhold federal income tax from your pay in 2024?
  • Did you make estimated tax payments?
  • Did you get a refund last year, and have it applied to your 2024 tax?

If you answered “yes” to any of these questions, you may be owed a refund. To receive the refund, you must file a 2024 tax return.

  1. Earned income tax credit– This is a tax credit for low- to moderate-income wage earners. It is a refundable tax credit, and the amount depends on the taxpayer’s income and number of children. The credit doesn’t just reduce the amount of tax owed but could also result in a refund. However, once again, to claim the EITC, you must file a return.
  2. Child tax credit– Taxpayers can claim this credit if they have a qualifying child under the age of 17 and meet other qualifications. The maximum amount per qualifying child is $2,000. Up to $1,700 of that amount can be refundable for each qualifying child. So, like the EITC, the Child Tax Credit can give a taxpayer a refund even if they owe no tax. Taxpayers may qualify for the full amount for each child if they earn $200,000 as an individual filer or $400,000 for joint filers. The credit phases out completely for incomes above that threshold.
  3.   American opportunity or lifetime earning credits – Two credits can help taxpayers paying higher education costs for themselves, a spouse or dependent. Even if the taxpayer doesn’t owe any taxes, they may still qualify. You need to complete Form 8863, Education Credits and file it with the tax return.

If you do not qualify for the either of these credits, you may benefit from taking the Tuition and Fees Deduction on your tax return.

Getting Late Filing Penalties Abated

Filing timely is very important because the late-filing and late-payment penalties and interest on unpaid taxes add up quickly. However, in some cases, a taxpayer filing after the deadline may qualify for penalty relief. For those charged a penalty, they may contact the IRS by calling the number on their notice and explain why they couldn’t file and pay on time.

Taxpayers who have a history of filing and paying on time often qualify for administrative penalty relief. A taxpayer usually qualifies if they have filed and paid timely for the past three years and meet other requirements.

An Opportunity For Taxpayers Who Owe The IRS

For people who owe the IRS, keep in mind that generally the IRS has 10 years to collect.  This period of time is referred to as the Statue Of Limitations For Collections.  The running of this Statute is not paused during a government shutdown.  Additionally, with a reduced workforce at IRS or a workface that is overwhelmed with catch-up after coming back from a government shut-down, there is a chance that older liabilities could be written off due to an expired Statue Of Limitations For Collections.

Also, do not think that if you owe the IRS your tax problem will disappear because of the efficiency measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2025, taxpayers who expect to owe for 2024 should have their 2024 income tax returns done now so that the 2024 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2025.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

The take away from this – use the present uncertain circumstances to your advantage to prepare for the future.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Francisco Bay Area (including San Jose and Walnut Creek) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

District Court Reinstates Corporate Transparency Act Enforcement

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Requirement For Banks & Financial Institutions To Report Beneficial Ownership Information Of Entity Accountholders Back In Force.

The Federal government in its efforts to crack down on illicit finance and enhance transparency on September 29, 2022 issued a final ruling establishing a beneficial ownership information reporting requirement, pursuant to the Corporate Transparency Act (CTA). This rule will require most corporations, limited liability companies, and other entities created in or registered to do business in the United States to report information about their beneficial owners – the persons who ultimately own or control the company – to the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN).  These filings are commonly referred as “BOI reports”.  But with the December 31, 20204 deadline approaching, we saw a lot of judicial action towards the end of 2024 and into the beginning of 2025 challenging this law.

Here is the sequence/timeline and status:

  1. District Court holds CTA is unconstitutional and issues preliminary injunction preventing enforcement of the CTA.
  2. Government immediately files motion to stay the preliminary injunction pending appeal (i.e. enforcement for the CTA continues).
  3. On 12/17/2024, District Court denies Government’s motion to stay the preliminary injunction pending appeal (i.e. no enforcement of the CTA allowed)
  4. On 12/23/2024, 5th Circuit Court of Appeals grants the Government’s motion to stay the preliminary injunction (i.e. enforcement of the CTA continues).
  5. On 12/26/2024, 5th Circuit Court of Appeals vacates the portion of the Order that allowed the Government to enforce the CTA.
  6. On 01/23/2025, the U.S. Supreme Court grant’s Government’s motion to stay the preliminary injunction pending appeal (i.e. enforcement of the CTA allowed)
  7. On 02/17/2025, the District Court for the Eastern District Of Texas grants Government’s motion to stay the preliminary injunction pending appeal (i.e. enforcement of the CTA allowed).

Purpose Of Reporting

Designed to protect U.S. national security and strengthen the integrity and transparency of the U.S. financial system, FINCEN stated that this ruling will help to stop criminal actors, including oligarchs, kleptocrats, drug traffickers, human traffickers, and those who would use anonymous shell companies to hide their illicit proceeds.

“For too long, it has been far too easy for criminals, Russian oligarchs, and other bad actors to fund their illicit activity by hiding and moving money through anonymous shell companies and other corporate structures right here in the United States,” said Acting FinCEN Director Himamauli Das. “This final rule is a significant step forward in our efforts to support national security, intelligence, and law enforcement agencies in their work to curb illicit activities. The final rule will also play an important role in protecting American taxpayers and businesses who play by the rules, but are repeatedly hurt by criminals that use companies for illegal reasons.”

Reporting Companies

The CTA broadly defines a “reporting company” as any corporation, limited liability company, or other similar entity created by filing a document with the secretary of state or similar office in any state or territory or with a federally recognized Indian Tribe, or formed under the laws of a foreign country and registered to do business in the United States.

Entities Not Required To Be Reported

There are certain entities that are excepted from being reported: (1) entities in certain regulated industries that already are subject to beneficial ownership reporting, (2) publicly traded companies, (3) investment vehicles operated by investment advisors, nonprofits, and government entities, and (4) “qualified exempt entities”.  A “qualified exempt entity” is an entity that (a) employs more than 20 employees; (b) filed in the previous year a tax return demonstrating more than $5 million in gross receipts or sales; and (c) has an operating presence at a physical office within the United States.

Beneficial Owners and the Information to Report

The CTA defines a “beneficial owner” of an entity as any individual who, directly or indirectly, (1) exercises substantial control over the entity or (2) owns or controls not less than 25% equity in the entity. The rule expressly excludes certain individuals from the definition of beneficial ownership, including (1) a minor child (as long as the child’s parent’s or guardian’s information is reported); (2) an individual acting as an intermediary or agent on behalf of another; (3) a person whose control over a reporting company derives solely from their employment; (4) an individual whose only interest in a reporting company is through a right of inheritance; or (5) a creditor of a reporting company (unless they qualify as a “beneficial owner” through substantial control or equity ownership).

What Information Gets Reported

In each report to FinCEN, a reporting company must provide each beneficial owner’s name, date of birth, residential or business address, and a unique identifying number from an acceptable identification document (such as a state driver’s license or passport).

Effective Date Is January 1, 2024.

The rule is effective January 1, 2024. Reporting companies created or registered before January 1, 2024, will have one year (until January 1, 2025) to file their initial reports, while reporting companies created or registered after January 1, 2024, will have 30 days after creation or registration to file their initial reports. Once the initial report has been filed, both existing and new reporting companies will have to file updates within 30 days of a change in their beneficial ownership information. With the finality of the Courts lifting the injunction as discussed above, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025.

The reporting rule is one of three rulemakings planned to implement the CTA. FinCEN will engage in additional rulemakings to: (1) establish rules for who may access beneficial ownership information, for what purposes, and what safeguards will be required to ensure that the information is secured and protected; and (2) revise FinCEN’s customer due diligence rule. In addition, FinCEN stated it continues to develop the infrastructure to administer these requirements, including the information technology system that will be used to store beneficial ownership information in accordance with the strict security and confidentiality requirements of the CTA.

FinCEN Issues Guide to Assist Small Businesses with Beneficial Ownership Reporting: The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) published a Small Entity Compliance Guide https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf  to assist the small business community in complying with the beneficial ownership information (BOI) reporting rule that became effective on January 1, 2024 under the Corporate Transparency Act.

Penalties for Violating CTA

The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine BOI Ownership Information report may be held accountable for that failure. However, the CTA contains a safe harbor from such civil and criminal liability for the submission of inaccurate information if the person who submitted the report voluntarily and promptly corrects the report within 90 days.

Don’t Take The Chance And Lose Everything You Have Worked For.

Protect yourself. You can expect the laws regarding customer due diligence requirements for financial institutions will also be updated to conform to the CTA as the CTA will be providing a new means for a financial institution to verify a customer’s “Know Your Customer” information.  If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. In addition, tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. can complete or update BOI reporting for your business. Additionally, if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Can You Go To Jail For Not Filing Tax Returns? Beware this can happen to you.

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A man who did not file tax returns for 4 years in a row pleaded guilty before a Federal District Court Judge to evading his income taxes and now must serve 8 months in jail.

As reported on October 24, 2024 by the Department Of Justice in a press release, from 2018 through 2021 John Goggins, age 63 of Chatham, New Jersey previously pleaded guilty before U.S. Magistrate Judge André M. Espinosa to a four-count information charging him with willfully failing to file federal income tax returns for tax years 2018 through 2021. Judge Espinosa imposed the sentence in Newark federal court.

According to documents filed in this case and statements made in court: Goggins was a former senior vice-president and general counsel of a large publicly traded corporation. For the years 2018 through 2021, Goggins earned total gross income of $54 million from wages, restricted stock awards, the exercise of annual nonqualified stock options, interest, dividends, and gains from stock sales. Nevertheless, Goggins failed to file federal income tax returns for those years.

In addition to the prison term, Judge Espinosa sentenced Goggins to one year of supervised release, ordered restitution to the IRS of $3.11 million, which has already been paid, and fined him $40,000.

An Opportunity To “Get Back Into The System” And Be Compliant.

Our tax system relies on initial voluntary compliance where taxpayers each year file a tax return; however, there are millions of Americans who fail to file a tax return and what’s worse is that these failures are not limited to just one year. Taxpayers who either have never filed a tax return or those who were once compliant but stopped filing a tax return for a period of time, face the same penalties.  Additionally, if the IRS chooses to pursue criminal prosecution and proves that the failure was willful, a taxpayer can be sentenced to prison.  So it is important to engage a tax attorney to come up with a plan to mitigate criminal exposure and establish an arrangement or settlement on the resulting tax liabilities.

An Opportunity For Taxpayers Who Owe The IRS.

As a prerequisite to any proposal (including but not limited to, an Offer In Compromise, payment plan or being put into “uncollectible status”) to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Since we are in 2025, taxpayers who expect to owe for 2024 should have their 2024 income tax returns as soon as possible so that the 2024 liability can be rolled over into any proposal.  Unfortunately, your obligation to make estimated tax payments for 2025 cannot be included in your proposal and the IRS will require as a prerequisite that you are current on these payments (1st quarter 2025 is due April 15, 2025).

All taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

Also, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period and a taxpayer is not agreeing to extend such, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statute.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Now That Pam Bondi Is Serving As Attorney General In Trump’s Second Term, How Will The U.S. Attorneys’ Office Support Or Hinder The Cannabis Industry?

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During President Trump’s 2016 campaign, he supported medical marijuana and deferred recreational use decisions to individual states. However, his first administration took a stringent approach, with then Attorney General Jeff Sessions rescinding Obama-era guidelines that limited federal interference in state-legal cannabis activities.

The Growing Trend In Legalizing Cannabis – Current Standings:

Medical marijuana is legal in 39 states and Washington DC

The medical use of cannabis is legal (with a doctor’s recommendation) in 39 states and Washington DC. Currently, the 39 states with medical marijuana legal include Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Virginia, Washington and West Virginia. The medical use of cannabis is also legal in the territories of the Northern Mariana Islands, Guam and Puerto Rico.

Recreational marijuana is legal in 23 states and Washington DC

Twenty-three states and Washington DC, have legalized marijuana for recreational use — no doctor’s letter required — for adults over the age of 21. Those 23 states being Alaska, Arizona, California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, Rhode Island, Vermont, Virginia and Washington and the territories of the Northern Mariana Islands and Guam.

Recreational marijuana is legal in 6 tribal nations.

Six Tribal nations have legalized marijuana for recreational use.  Those 6 tribes being the Flandreau Santee Sioux Tribe (South Dakota), Oglala Lakota Sioux Tribe (South Dakota), Suquamish Tribe (Washington state), Squaxin Island Tribe (Washington State), Eastern Band of Cherokee Indians (North Carolina) and St. Regis Mohawk Tribe (New York).

Conflict With Federal Law.

Under Federal law (Controlled Substances Act 21 U.S.C. 801) marijuana is designated as a Schedule I controlled substance due to the historical belief that it has a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision.

What To Consider In A Second Trump Administration

During the 2024 election campaign, Trump expressed support for reclassifying marijuana from a Schedule I to a Schedule III substance under the Controlled Substances Act. He stated, “It is time to end needless arrests and incarcerations of adults for small amounts of marijuana for personal use.”  He also voiced support for marijuana industry access to the banking system and the federal cannabis rescheduling process initiated by the Biden administration. Furthermore, Trump also endorsed Florida’s Amendment 3, a ballot initiative aimed at legalizing recreational marijuana for adults 21 and older.  However, even though 55.9% of Floridians voted in favor of it (including Trump who is a Florida resident), the amendment in Florida did not pass as a 60% vote is required.

While Trump’s recent statements on cannabis suggest a shift toward reform, his administration’s past actions reflect a more stringent approach. Time will tell how the second Trump administration will handle cannabis. In the 2024 election, Republicans reclaimed a majority in the Senate and still control the House. As any president’s ability to unilaterally change federal marijuana laws is limited and favorable judicial intervention is unlikely, it is up to congress to launch substantial cannabis reform which under the current makeup of congress is more unlikely to happen.

Trump’s Nomination Of Pam Bondi for Attorney General

After former Representative Matt Gaetz withdrew his nomination as Attorney General, Trump tapped former Florida Attorney General, Pam Bondi, to be Attorney General.  Compared to Gaetz, who has widely known pro-legalization stance on cannabis and had even vowed to “go easy” on the cannabis industry if he got the job, Bondi’s record on the issue is far less pro-reform.  For example, as Florida’s Attorney General, Bondi opposed efforts to legalize medical cannabis.  Additionally, during Trump’s first term in office, Bondi served on the President’s Commission on Combating Drug Addiction and the Opioid Crisis, which issued a report that expressed concerns about cannabis legalization.

But despite the possibility of a cannabis-friendly Department Of Justice, the cannabis industry still faces risks that non-cannabis businesses do not face.

Risk Of Losing All Bank Privileges

While states are opening their markets to marijuana, the illegality under Federal law still restricts cannabis businesses access to banking channels. On February 14, 2014, the Financial Crimes Enforcement Network (“FinCEN”) which is a division of the Department Of Treasury issued guidance (FIN-2014-G001) clarifying how financial institutions can provide services to marijuana-related businesses consistent with their Bank Secrecy Act (“BSA”) obligations, and aligned the information provided by financial institutions in BSA reports with federal and state law enforcement priorities. This FinCEN guidance issued by the Department Of Treasury was following the Cole Memo issued by the DOJ. But now that the Cole Memo has been rescinded, the FinCEN guidance is not has persuasive leading many banks to turn away cannabis businesses. For those cannabis businesses that have eluded banks with their true business activity (which such misrepresentation is also a Federal crime), those businesses run the risk of having their bank accounts shut down by the bank when the bank learns of their true business activity so it is important to secure qualified legal counsel to come up with solutions that will allow you to still conduct business and meet financial obligations.

Risk Of Getting A Big Tax Bill From IRS That You Cannot Pay

Generally, businesses can deduct ordinary and necessary business expenses under I.R.C. §162. This includes wages, rent, supplies, etc. However, in 1982 Congress added I.R.C. §280E. Under §280E, taxpayers cannot deduct any amount for a trade or business where the trade or business consists of trafficking in controlled substances…which is prohibited by Federal law. Marijuana, including medical marijuana, is a controlled substance. What this means is that dispensaries and other businesses trafficking in marijuana have to report all of their income and cannot deduct rent, wages, and other expenses, making their marginal tax rate substantially higher than most other businesses. A cannabis business that has not properly reported its income and expenses and not engaged in the planning to minimize income taxes can face a large liability proposed by IRS reflected on a Notice Of Deficiency or tax bill.

How Do You Know Which Cannabis Tax Attorney Is Best For You?

Given that cannabis is still illegal under existing Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government.  While cannabis is legal in California and several other states, that is not enough to protect you.  It’s coming down that the biggest risk is TAXES.  Your need to protect yourself and your investment. Level the playing field and gain the upper hand by engaging the cannabis tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), the Inland Empire (Ontario and Palm Springs) and other California locations. We can come up with solutions and strategies to these risks and protect you and your business to maximize your net profits. Be proactive and engage an experienced Cannabis Tax Attorney in your area. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County, Inland Empire (Ontario and Palm Springs) and other California locations protect you and maximize your net profits.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Six Common Myths About The Dreaded IRS Tax Audit

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Filing taxes is punishment enough without the vague threat of an IRS audit looming over our heads. For understandable reasons, the IRS insists on keeping the ins and outs of its auditing process on the murky side. How will you catch the bad guys if you give them the rule book first?   But because of the sense of mystery around the process, it’s an area of regulation often misunderstood by taxpayers.

Here are a few common myths about the dreaded tax audit:

Myth #1: Only the wealthy get audited.

While it’s true that big businesses and the uber-rich are often targets of IRS tax probes, that doesn’t necessarily mean low- and middle-income workers are free and clear. The agency is increasingly relying on data mining and robo-audit systems to detect errors in tax returns, which has actually made it easier to go after small-fish taxpayers.

In 2018, the IRS audited 520,000 of the 153.9 million tax returns filed – an overall audit rate of 0.3% but a substantial portion of those selected for audit involve taxpayers with an adjusted gross income of less than $1 million. One of the biggest reasons behind this trend is the IRS’s move to pursue people who fraudulently claim the Earned Income Tax Credit, a juicy tax break that for calendar year 2024 is worth an average $7,830 for a family of five earning less than $66,819 a year.  IRS estimates that around 33 percent of EITC claims are paid in error. Some of the errors are unintentional caused by the complexity of the law, but some of the claims are intentional disregard of the law.

If you really look at the scrutiny of low- and middle-income wage earners, there is much more detailed scrutiny now than for those with investments and other sources of income. It just takes fewer resources to audit lower-income earners. And in all fairness to the IRS, Congress hasn’t been exactly generous with budgets. It was only until the Inflation Reduction Act of 2022 was signed into law by then President Biden that IRS was promised additional funding over the next 10 years.  But now that Trump is serving as President and the Republicans control Congress, this additional funding is in serious jeopardy.

Myth #2:  An audit means you’ll have an IRS agent knocking down my door

If the IRS’s computer system flags your tax return, you’d be hard-pressed to get an agent to pick up the phone, let alone make a house call.  The traditional IRS audit and someone showing up on your doorstep is a thing of the past.

For starters, the IRS does not have the manpower. Thanks to rounds of budget cuts, the IRS has had to reduce staff and has no time or expense to send out agents to your home or office.  Additionally, with the fraud and personal safety issues of strangers coming to your doorstep, the IRS is not looking to put their agents in danger or commit additional resources to prove to taxpayers that the officials who are making the house-call are genuine IRS agents.

That is not to say that IRS stopped doing field visits but if your return is flagged, the initial contact will likely be a letter in the mail seeking additional information. From there, you can either answer by return mail or call them directly.

Myth #3: If I owe tax money, the IRS will be after me in a hurry

Rest assured, if IRS flags your return for suspicious activity, you will hear from them at some point — but probably not for a year or two…or more. The IRS normally has three years to go after questionable tax returns, and with personnel shortages, even taxpayers who willingly call them to sort out issues have a hard time getting them resolved.

Millions of phone calls to the IRS still go unanswered as most people don’t want to wait sometimes for hours to get through to a human being.  It is not uncommon that the phone lines are closed due to technical problems or heavy traffic.

The IRS is under-funded and under-staffed. If a consumer calls the IRS, when they get through to a human being, they will likely just be told where to find the answer on the IRS website.

Myth #4: If I file for too many deductions and tax credits, I’m setting myself up for an audit

Tax credits and deductions are there for a reason: to ease the tax burden for workers who need it most. Don’t let the threat of an audit dissuade you from applying for tax credits and deductions you’re justifiably due.

Despite the IRS’s efforts to crack down on Earned Income Tax Credit fraud, it is actually one of the most commonly overlooked deductions.

Home-office deductions are another oft-cited target for the IRS. But it’s an overblown fear that hardly applies today, when there are more than 42 million Americans working as freelancers and independent contractors.

This was once the case, back when working from home was less common but with millions of home offices running today, the system is far more accommodating for home office users. The important thing to remember: Make sure you keep your receipts and documents and only deduct legitimate business expenses… which mean that the expense must be typical and necessary for your business.

The bottom line: If you’ve earned a tax credit or can justifiably claim a deduction, do it. Just make sure you’ve done the research and know what you need to back up your claim first.

Myth #5: I’ve got my tax refund so I don’t have to worry about an audit.

Even if your tax return was accepted and you cashed your refund check, you’re still fair game for auditors.

The IRS uses a special matching system that tracks each taxpayer’s W-2s, 1099s and 1040 forms. If it turns out that you’ve under-reported your income, the system will eventually catch up to you.

You could get your refund, and about one or almost two years later, if there’s a problem with your taxes, you’ll likely get a letter in the mail from the IRS.

As noted above, the IRS has three years to track you down, but in extreme cases of underreporting or tax evasion, they can basically come after you whenever they want.

And that’s not even the worst part. Any interest and penalties owed on your unpaid taxes will start accruing the day your taxes were due — not two years later when the IRS letter finally shows up in your mailbox. Two years of compounding interest and penalty charges will only add salt to the wound.

Myth #6: If I hire a tax attorney, the agent will go hard thinking that I have something to hide.

You should recognize that the agent has many audits assigned to him or her and needs to report progress to the group’s supervisor.  The more time that an agent has to spend on one case, it takes away time from other cases.

It is for that reason that agents prefer to deal with a tax professional representative as they know how information should be presented and the agent need not spend the extra time to educate the representative unlike a taxpayer who knows little or nothing about tax procedure.

What Should You Do?

When faced with an IRS audit, an effective strategy can be the key to obtaining a favorable outcome and the chances of this should be better if you hire a qualified and experience tax professional.  Early in the audit process, your representative should consider the policy against repetitive examination, the IRS policy on reopening examinations, and the various statutes of limitations that apply to examination of a taxpayer’s records and books.

1. The IRS Policy Concerning Repetitive Examinations

An initial consideration is whether or not the taxpayer’s audit violates the IRS’s policy against repetitive examinations. The policy against repetitive examinations applies when the taxpayer has been audited in the past two years, and the audits resulted in essentially no change. If you are a taxpayer who has been audited once in the past two years and your audit resulted in little or no change, then you should raise the repetitive examinations issue with the IRS immediately upon receiving an audit letter from the IRS. In many cases, the audit can be resolved and closed at this very early stage if the requirements of the repetitive examinations policy are met. This is a very useful strategy that can be used to simplify the audit process for the taxpayer.

2. The IRS Policy Concerning Reopening Examinations

The IRS generally does not reopen closed cases. It may occur in rare cases and under very limited circumstances. If the IRS tries to reopen a closed case, the taxpayer or his or her qualified representative should ensure that the IRS is following its own procedures and regulations regarding to reopening closed IRS examinations.

3. Statutes of Limitation Applying to IRS Audits

Another factor that the taxpayer or his or her representative must consider initially when receiving an IRS audit notice is the application of various statutes of limitation governing audits. Generally, the IRS can include returns filed within the last three years in an audit. However, the IRS does have significant leeway to expand an audit to include additional tax years if the examination reveals a need to look into the taxpayer’s tax situation in previous years. At the same time, this right of the IRS to examine additional years but be tempered by an opposing requirement that the examination of the taxpayer’s tax return be reasonable. Internal Revenue Code section 7605(b) states that only one inspection shall be made of a taxpayer’s books of account for each taxable year. IRC 7605(b) also provides that no taxpayer shall be subjected to unnecessary examinations or investigations of his or her tax liability. Consideration of statutes of limitation, as well as any reasonableness arguments that can be made on the taxpayer’s behalf, are an essential component of any IRS audit strategy.

Don’t Take The Chance And Lose Everything You Have Worked For.

Protect yourself. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also, if you are involved in cannabis, check out what our cannabis tax attorney can do for you. Additionally, if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Supreme Court Allows Corporate Transparency Act Enforcement

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Requirement For Banks & Financial Institutions To Report Beneficial Ownership Information Of Entity Accountholders Back In Force By The Highest Court.

The Federal government in its efforts to crack down on illicit finance and enhance transparency on September 29, 2022 issued a final ruling establishing a beneficial ownership information reporting requirement, pursuant to the Corporate Transparency Act (CTA). This rule will require most corporations, limited liability companies, and other entities created in or registered to do business in the United States to report information about their beneficial owners – the persons who ultimately own or control the company – to the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN).  These filings are commonly referred as “BOI reports”.

Law Invalidated Less Than One Month Before Reporting Deadline

On December 3, 2024 Judge Amos L. Mazzant III of the US District Court for the Eastern District of Texas issued the injunction at the request of a family-run firearms and tactical gear retailer, called Texas Top Cop Shop Inc., among other co-plaintiff businesses and the Libertarian Party of Mississippi. Their lawsuit alleged that the CTA falls outside of Congress’s powers to regulate interstate and foreign commerce because it regulates incorporated entities regardless of whether they engage in commercial activity.

In issuing the Court’s Opinion (Texas Top Cop Shop, Inc. v. Garland, E.D. Tex., No. 4:24-cv-00478, 12/03/2024), the Court agreed that the law’s requirements exceed Congress’s commerce authority.  “For good reason, Plaintiffs fear this flanking, quasi-Orwellian statute and its implications on our dual system of government,” Mazzant wrote.

The government appealed the preliminary injunction granted by the district court that enjoins enforcement of the CTA to the 5th Circuit.  On December 17, 2024, the U.S. District Court for the Eastern District of Texas issued an Order denying the government’s motion to stay the nationwide preliminary injunction.  It is likely that this Order is the last formal decision on the CTA prior to December 31, 2024 that would require filing (at least filing prior to December 31, 2024.

Then on December 23, 2024, the 5th Circuit Court of Appeals issued its Order granting the Government’s motion to stay the preliminary injunction – meaning that the enforcement of the CTA continues despite the pending appeal before said Court, but with all this conflicting activity occurring at year’s end, on December 23, 2024 FinCEN announced a series of short filing extensions to those companies with upcoming due dates:

  • Companies created or registered prior to January 1, 2024, now have until January 13, 2025, to file their initial BOI reports with FinCEN. This is an extension from the original January 1, 2025, deadline.
  • Companies with an original reporting deadline between December 3, 2024, and December 23, 2024, these companies now have until January 13, 2025, to file.
  • Companies created or registered between December 3, 2024, and December 23, 2024, have an additional 21 days from their original filing deadline to submit their reports.

For Companies Created or Registered On or After January 1, 2025: These companies must file their initial BOI reports with FinCEN within 30 days of receiving actual or public notice that their creation or registration is effective.

But Then The 5Th Circuit Court Of Appeals Flip-Flops Its Position Reinstating The Nationwide Injunction Staying Enforcement

In another Order issued on December 26, 2024, the 5th Circuit vacated the portion of its own December 23rd order that granted the Government’s motion to stay the preliminary injunction in order to “preserve the constitutional status quo”.  This means that compliance with the CTA (BOI Reporting) is optional again.

Supreme Court Weighs In And Lifts The Stay – CTA (BOI Reporting) Is Now Required.

On January 23, 2025 the U.S. Supreme Court ruled that it will allow the government to implement the CTA thus requiring millions of businesses to file information on their beneficial owners.  The justices stayed the injunction blocking the enforcement of the CTA, which requires US entities to disclose who owns and controls their businesses. The move paves a path for the government to move ahead with enforcement of the law while its merits are being debated in the US Court of Appeals for the Fifth Circuit. That court plans oral arguments March 25.

Here is the sequence/timeline and status:

  1. District Court holds CTA is unconstitutional and issues preliminary injunction preventing enforcement of the CTA.
  2. Government immediately files motion to stay the preliminary injunction pending appeal (i.e. enforcement for the CTA continues).
  3. On 12/17/2024, District Court denies Government’s motion to stay the preliminary injunction pending appeal (i.e. no enforcement of the CTA allowed)
  4. On 12/23/2024, 5th Circuit Court of Appeals grants the Government’s motion to stay the preliminary injunction (i.e. enforcement of the CTA continues).
  5. On 12/26/2024, 5th Circuit Court of Appeals vacates the portion of the Order that allowed the Government to enforce the CTA.
  6. On 01/23/2025, the U.S. Supreme Court grant’s Government’s motion to stay the preliminary injunction pending appeal (i.e. enforcement of the CTA allowed)

Clearly the 5th Circuit will not be issuing its opinion until sometime after the schedule oral arguments of March 25, 2025 but it is likely that whatever decision is rendered, it will be appealed to the U.S. Supreme Court.

Purpose Of Reporting

Designed to protect U.S. national security and strengthen the integrity and transparency of the U.S. financial system, FINCEN stated that this ruling will help to stop criminal actors, including oligarchs, kleptocrats, drug traffickers, human traffickers, and those who would use anonymous shell companies to hide their illicit proceeds.

“For too long, it has been far too easy for criminals, Russian oligarchs, and other bad actors to fund their illicit activity by hiding and moving money through anonymous shell companies and other corporate structures right here in the United States,” said Acting FinCEN Director Himamauli Das. “This final rule is a significant step forward in our efforts to support national security, intelligence, and law enforcement agencies in their work to curb illicit activities. The final rule will also play an important role in protecting American taxpayers and businesses who play by the rules, but are repeatedly hurt by criminals that use companies for illegal reasons.”

Reporting Companies

The CTA broadly defines a “reporting company” as any corporation, limited liability company, or other similar entity created by filing a document with the secretary of state or similar office in any state or territory or with a federally recognized Indian Tribe, or formed under the laws of a foreign country and registered to do business in the United States.

Entities Not Required To Be Reported

There are certain entities that are excepted from being reported: (1) entities in certain regulated industries that already are subject to beneficial ownership reporting, (2) publicly traded companies, (3) investment vehicles operated by investment advisors, nonprofits, and government entities, and (4) “qualified exempt entities”.  A “qualified exempt entity” is an entity that (a) employs more than 20 employees; (b) filed in the previous year a tax return demonstrating more than $5 million in gross receipts or sales; and (c) has an operating presence at a physical office within the United States.

Beneficial Owners and the Information to Report

The CTA defines a “beneficial owner” of an entity as any individual who, directly or indirectly, (1) exercises substantial control over the entity or (2) owns or controls not less than 25% equity in the entity. The rule expressly excludes certain individuals from the definition of beneficial ownership, including (1) a minor child (as long as the child’s parent’s or guardian’s information is reported); (2) an individual acting as an intermediary or agent on behalf of another; (3) a person whose control over a reporting company derives solely from their employment; (4) an individual whose only interest in a reporting company is through a right of inheritance; or (5) a creditor of a reporting company (unless they qualify as a “beneficial owner” through substantial control or equity ownership).

What Information Gets Reported

In each report to FinCEN, a reporting company must provide each beneficial owner’s name, date of birth, residential or business address, and a unique identifying number from an acceptable identification document (such as a state driver’s license or passport).

Effective Date Is January 1, 2024.

The rule is effective January 1, 2024. Reporting companies created or registered before January 1, 2024, will have one year (until January 1, 2025) to file their initial reports, while reporting companies created or registered after January 1, 2024, will have 30 days after creation or registration to file their initial reports. Once the initial report has been filed, both existing and new reporting companies will have to file updates within 30 days of a change in their beneficial ownership information.

The reporting rule is one of three rulemakings planned to implement the CTA. FinCEN will engage in additional rulemakings to: (1) establish rules for who may access beneficial ownership information, for what purposes, and what safeguards will be required to ensure that the information is secured and protected; and (2) revise FinCEN’s customer due diligence rule. In addition, FinCEN stated it continues to develop the infrastructure to administer these requirements, including the information technology system that will be used to store beneficial ownership information in accordance with the strict security and confidentiality requirements of the CTA.

FinCEN Issues Guide to Assist Small Businesses with Beneficial Ownership Reporting: The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) published a Small Entity Compliance Guide https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf  to assist the small business community in complying with the beneficial ownership information (BOI) reporting rule that became effective on January 1, 2024 under the Corporate Transparency Act.

Penalties for Violating CTA

The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine BOI Ownership Information report may be held accountable for that failure. However, the CTA contains a safe harbor from such civil and criminal liability for the submission of inaccurate information if the person who submitted the report voluntarily and promptly corrects the report within 90 days.

Don’t Take The Chance And Lose Everything You Have Worked For.

Protect yourself. While the law is put on hold for now, you can expect the laws regarding customer due diligence requirements for financial institutions will also be updated to conform to the CTA as the CTA will be providing a new means for a financial institution to verify a customer’s “Know Your Customer” information.  If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. In addition, tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. can complete or update BOI reporting for your business. Additionally, if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Jews Granted Minority Status By U.S. Department Of Commerce, Opening Access To Billions In Benefits

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In a landmark agreement, the U.S. Department of Commerce during the Biden administration announced it has officially recognized Jewish-owned businesses as Minority Business Enterprises (“MBE”). This designation, formalized through a memorandum of understanding (“MOU”) between the Orthodox Jewish Chamber of Commerce and the Minority Business Development Agency (“MBDA”), enables Jewish entrepreneurs to access a plethora of federal programs, contracts, loans, and grants previously unavailable to them.

Since 1969, the MBDA has provided significant benefits to minority groups such as Hispanics, who make up 19% of the population, African Americans at 15%, and other minority communities, offering access to numerous programs and grants amounting to billions of dollars.  According to statistics published by Brandeis University, Jews make up about 2.4% of the American population, yet until this recent decision Jewish businesses were not previously included in these opportunities.

As part of the MOU signed on January 13, 2025, the federal government is developing a new application process for MBE certification including the exact methods for verifying Jewish heritage. The updated application will no longer require applicants to specify their minority background; instead, verification will occur during the certification process.

Benefits To Jewish Businesses

The MOU will leverage MBDA and OJCC’s collective abilities, networks and assets; helping each other expand the public’s awareness of their priorities, initiatives, and resources available to the Jewish community. This MOU will also help both MBDA and OJCC identify opportunities to participate in conferences, workshops, seminars, and other educational outreach activities.

“The Minority Business Development Agency is excited to collaborate with the Orthodox Jewish community and help break down barriers and expand opportunities for the global Jewish community’s entrepreneurs,” said Eric Morrissette, performing the non-exclusive duties of the Under Secretary of Commerce for Minority Business Development. “This MOU will help expand access for Jewish businesses and professionals, and the business world at large.”

“The Orthodox Jewish Chamber of Commerce is a tremendous partner, helping to fuel the business creation and growth that are driving forces for the nation’s economy,” said Deputy Secretary of Commerce Don Graves. “The Biden-Harris Administration, the Department of Commerce, and MBDA are committed to ensuring Jewish business and entrepreneurs have access to the resources and opportunities needed to grow their business.”

This MOU is built upon a long history of collaboration between the MBDA and OJCC, centered on fostering economic development, enhancing access to opportunities, and supporting MBEs within the Orthodox Jewish community.

“It’s a tremendous honor to work with leaders like Deputy Secretary Don Graves, Deputy Under Secretary Morrissette, and Joann Hill from MBDA, whose efforts have led to closer and more intentional collaboration between MBDA and OJCC,” said Duvi Honig, Founder & CEO of the Orthodox Jewish Chamber of Commerce. “This MOU signing marks a significant opportunity for the Jewish community and is a testament to their outstanding leadership.”

The Big Picture:

The recognition of Jewish-owned businesses as MBEs marks a significant step toward equitable access to resources and opportunities. It acknowledges the unique challenges faced by the Jewish community and provides a framework for fostering growth and resilience among Jewish entrepreneurs across the United States. This MOU signing is a part of an initiative by MBDA to expand overall MBE access to contracts, capital, and to increase participation with various new industries within the public and private sectors for a wide variety of business demographics.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also, if you are involved in cannabis, check out what our cannabis tax attorney can do for you. Additionally, if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Former DEA Official Derek Maltz: Trump’s nominee to lead the DEA. What Could This Mean To The Future Of Cannabis Rescheduling?

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On January 20, 2025 President Trump named Derek Maltz to take over as DEA administrator on an interim basis.  Since his previous retirement from the DEA, Maltz was working as head of government relations for a software company.   Maltz, whose 28-year DEA career included 10 years as special agent in charge of the agency’s Special Operations Division, assumes control from the agency’s previous chief, Anne Milgram.  During Milgram’s tenure the process to reclassify cannabis from a Schedule I substance to a Schedule III substance was started and is still going on.

The prime benefits of reclassifying cannabis from a Schedule I substance to a Schedule III substance is that the Federal government would recognize medical benefits of cannabis, make Section 280E inapplicable to licensed cannabis operators, and open up financial and banking markets.

Cannabis Rescheduling Hearing Indefinitely Stayed

On August 26, 2024 the Drug Enforcement Administration (“DEA”) released its notice scheduling a hearing for December 2, 2024 on its proposal to lower the classification of marijuana to the less-dangerous level of Schedule III.  DEA Administrator Anne Milgram said she would determine who will participate in the hearing and name a presiding officer to run the meeting.  If approved, the agency can then publish the final rule in the Federal Register.

John Mulrooney has been appointed as the Administrative Law Judge (ALJ).  On December 2, 2024 the DEA convened the initial hearing in the rescheduling process. The hearing was supposed to officially commence on January 21, 2025 and conclude during the first week of March; but on January 13, 2025 Mulrooney issued a ruling that included the cancellation of a hearing starting January 21st pending the outcome of a yet-to-be-filed “interlocutory appeal” to the agency’s eventual successor administrator which will be appointed by President-elect Donald Trump after he takes the oath of office.

How We Got Here …

The Associated Press reported on April 30, 2024 that the Drug Enforcement Administration (“DEA”) will propose a rule to reschedule cannabis to Schedule III under the Controlled Substance Act. The proposed rule has since been reviewed by the Department Of Justice and on May 16, 2024 has been published in the Federal Register. This publication then opened the period of time to July 22, 2024 for the DEA to take public comment on the plan to move marijuana from its current classification as a Schedule I drug, alongside heroin and LSD. The proposed rule moves cannabis to Schedule III, alongside ketamine and some anabolic steroids, following a recommendation from the federal Health and Human Services Department. More than 40,000 people submitted comment with a vast majority indicating favor of the proposed rule reclassifying cannabis.  But when two pro-rescheduling “designated participants” [those two being Village Farms International, a Florida-based agricultural firm that produces cannabis in Canada under a federal license there, and Texas-based Hemp for Victory] were denied to participate in the hearing filed an appeal, Mulrooney ordered a stop on the upcoming hearing with no new date set.

How Maltz Can Impact Rescheduling?

Maltz previously reported to the Associated Press in May 2024 that “It’s crystal clear to me that the Justice Department hijacked the rescheduling process, placing politics above public safety. If there’s scientific evidence to support this decision, then so be it, but you’ve got to let the scientists evaluate it.”  There’s no clear timeline as to when or if Maltz might entertain the appeal that has temporarily halted the marijuana rescheduling process although in a September 2024 post on his Truth Social platform, Trump signaled support for rescheduling cannabis under the Controlled Substances Act, a process that former President Joe Biden launched in October 2022.

The Growing Trend In Legalizing Cannabis – Current Standings:

Medical marijuana is legal in 38 states and Washington DC, and soon to be 39 states with the passage of medical marijuana in Nebraska in the 2024 election

The medical use of cannabis is legal (with a doctor’s recommendation) in 38 states and Washington DC. Nebraska will soon be the 39th state to legalize it with the recent passage of the medical marijuana measure in the 2024 election. Currently, the 38 states with medical marijuana legal include Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Virginia, Washington and West Virginia. The medical use of cannabis is also legal in the territories of the Northern Mariana Islands, Guam and Puerto Rico.

Recreational marijuana is legal in 23 states and Washington DC

Twenty-three states and Washington DC, have legalized marijuana for recreational use — no doctor’s letter required — for adults over the age of 21. Those 23 states being Alaska, Arizona, California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, Rhode Island, Vermont, Virginia and Washington and the territories of the Northern Mariana Islands and Guam.

Recreational marijuana is legal in 6 tribal nations.

Six Tribal nations have legalized marijuana for recreational use.  Those 6 tribes being the Flandreau Santee Sioux Tribe (South Dakota), Oglala Lakota Sioux Tribe (South Dakota), Suquamish Tribe (Washington state), Squaxin Island Tribe (Washington State), Eastern Band of Cherokee Indians (North Carolina) and St. Regis Mohawk Tribe (New York).

Proponents Of The New Rule Argue That If Approved, Will Put Federal Law More In Line With State Laws.

Currently, under Federal law (Controlled Substances Act 21 U.S.C. 801) marijuana is designated as a Schedule I controlled substance due to the historical belief that it has a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision.

Proponents Of The New Rule Argue That If Approved, Will Result In A Tax Regime Similar To What Non-Cannabis Businesses Face.

Generally, businesses can deduct ordinary and necessary business expenses under I.R.C. §162. This includes wages, rent, supplies, etc. However, in 1982 Congress added I.R.C. §280E. Under §280E, taxpayers cannot deduct any amount for a trade or business where the trade or business consists of trafficking in controlled substances…which is currently prohibited by Federal law. Marijuana, including medical marijuana, is a controlled substance. What this means is that dispensaries and other businesses trafficking in marijuana have to report all of their income and cannot deduct rent, wages, and other expenses, making their marginal tax rate substantially higher than most other businesses.  Therefore, under current law, the Internal Revenue Code which treats businesses in the marijuana industry differently resulting in such business paying at least 3-times as much in taxes as ordinary businesses.

However, Even If The New Rule Is Approved, DOES NOT Change Reporting Of Cash Payments.

The Bank Secrecy Act of 1970 (“BSA”) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. The BSA requires any business receiving one or more related cash payments totaling more than $10,000 to file IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

The minimum penalty for failing to file EACH Form 8300 is $25,000 if the failure is due to an intentional or willful disregard of the cash reporting requirements. Penalties may also be imposed for causing, or attempting to cause, a trade or business to fail to file a required report; for causing, or attempting to cause, a trade or business to file a required report containing a material omission or misstatement of fact; or for structuring, or attempting to structure, transactions to avoid the reporting requirements. These violations may also be subject to criminal prosecution which, upon conviction, may result in imprisonment of up to 5 years or fines of up to $250,000 for individuals and $500,000 for corporations or both.

Marijuana-related businesses operate in an environment of cash transactions as many banks remain reluctant to do business with many in the marijuana industry. Like any cash-based business the IRS scrutinizes the amount of gross receipts to report and it is harder to prove to the IRS expenses paid in cash. So it is of most importance that the proper facilities and procedures be set up to maintain an adequate system of books and records.

So with all these potential benefits, what forces are present to block this proposed rule?

  1. Administrative Judge Mulrooney rules against rescheduling or as he ended up doing, put an indefinite stay on the hearing proceedings. His replacement has the same authority.
  2. Chevron Doctrine repealed by U.S. Supreme Court. The regulatory state has been in full force since, ironically, 1984, with the institution of the Chevron Doctrine. The Chevron Doctrine has required courts to defer to the expertise of administrative agencies when the legislative intent of an underlying law is ambiguous, which made it a cornerstone of how regulators and businesses interact. But on June 28, 2024, the Supreme Court’s Republican-appointed majority demolished the doctrine in its rulings in the Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo appeals, overturning the broad authority of the administrative state and raising fresh questions about how cannabis will be regulated moving forward. Keep in mind that rescheduling has been moving forward as a regulatory, rather than a legislative, change, and now, regulations do not hold the same force of law as they did since 1984. But even if the Chevron Doctrine was not repealed, the normal rule making process still faces certain congressional and judicial challenges explained further below.
  3. Congressional Challenges. Under the Small Business Regulatory Enforcement Fairness Act (also known as the Congressional Review Act), new final rules must be sent to Congress and the Government Accountability Office for review before they can take effect. “Major rules” (ones that are economically significant and require OIRA review) must be made effective at least 60 days after the date of publication in the Federal Register, allowing time for Congressional review. In emergency situations, a major rule can be made effective before 60 days. If the House and Senate pass a resolution of disapproval and the President signs it (or if both houses override a presidential veto), the rule becomes void and cannot be republished by an agency in the same form without Congressional approval. Since 1996, when this process started, Congress has disapproved only one rule. Congress may also exercise its oversight in other ways, by holding hearings and posing questions to agency heads, by enacting new legislation, or by imposing funding restrictions.
  4. Judicial Challenges. Individuals and corporate entities may go into the courts to make a claim that they have been, or will be, damaged or adversely affected in some manner by a regulation. The reviewing court can consider whether a rule: is unconstitutional; goes beyond the agency’s legal authority; was made without following the notice-and-comment process required by the Administrative Procedure Act or other law; or was arbitrary, capricious, or an abuse of discretion. An agency head can also be sued for failing to act in a timely manner in certain cases. If a court sets aside (vacates) all or part of a rule, it usually sends the rule back to the agency to correct the deficiencies. The agency may have to reopen the comment period, publish a new statement of basis and purpose in the Federal Register to explain and justify its decisions, or re­start the rulemaking process from the beginning by issuing a new proposed rule.

The most certain way that cannabis can be legalized and thus be treated like any other lawful business is by Congress enacting legislation. 

Top Democratic senators, including Senate Majority Leader Chuck Schumer (D-NY), continue to push the DEA to ‘promptly finalize” the rule to reschedule marijuana.  On August 2, 2024 Sen. Schumer, Sen. Cory Booker (D-NJ), Sen. Ron Wyden (D-OR) and others sent a letter to Attorney General Merrick Garland and DEA Administrator Anne Milgram imploring the administration to follow through on a proposal to move cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA), as the Justice Department formally proposed in May.  What is so surprising is that these legislators have the power to enact legislation completely bypassing the DEA’s rule-making authority and potential judicial challenges and send a bill to the President rescheduling cannabis or even excluding cannabis from the application of IRC Sec. 280E.

How Do You Know Which Cannabis Tax Attorney Is Best For You?

Given that cannabis is still illegal under existing Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government so it is best to be proactive and engage an experienced cannabis tax attorney in your area who is highly skilled in the different legal and tax issues that cannabis businesses face.  Let the cannabis tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), the Inland Empire (Ontario and Palm Springs) and other California locations protect you and maximize your net profits.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Former Missouri Congressman and Auctioneer – Billy Long: Trump’s nominee to lead IRS. What Could This Mean To The Future Of IRS Tax Enforcement?

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Danny Werfel who was sworn in as the 50th IRS Commissioner on April 4, 2023 announced his resignation effective January 20, 2025 even though his current 4-year term does not expire until 2027.  Donald Trump who will be inaugurated as President on January 20, 2025 has named his nominee, former U.S. Representative Billy Long of Missouri, to head the IRS.

Difference In Backgrounds

Danny Werfel, previously served as acting IRS commissioner before his current term appointment and held leadership roles at the Office of Management and Budget. He also worked in the private sector as a managing director at Boston Consulting Group.  In contrast Billy Long worked many years as a real estate agent and as an auctioneer before spending a dozen years in Congress.  In the last two years since leaving Congress, Long worked for at least two firms that marketed the employee retention credit — a pandemic-era benefit designed to support businesses that kept workers despite revenue losses or disruptions caused by COVID-19.  The credit while designed to help businesses remain in business despite the impact of COVID-19, also attracted fraud, eventually leading to IRS enforcement and investigative activity that is still going on.

Given the $80 billion in new funding that the IRS started receiving under the Inflation Reduction Act, one of Werfel’s first tasks was to produce the IRS’s strategic operating plan on how it will spend these funds.  Commissioner Werfel promised “real world improvements for every taxpayer, every tax professional, and every IRS employee.” But if Long is confirmed, he will have the power to influence how Americans pay their taxes and how the federal government collects revenue. Trump has promised to end IRS “overstepping” and Republicans have said that they would slash billions of dollars in funding passed under the Inflation Reduction Act that Wefel was relying on to modernize the IRS and enhance tax enforcement.

For taxpayers who have outstanding issues with the IRS or are at risk of being audited or investigated by the IRS, a scaling back of the additional funding and change in posture of the IRS could create new tax relief opportunities.

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. For California taxpayers, the Franchise Tax Board has up to four years to select a California State Income Tax Return for audit. In some cases these 3 and 4 year periods are extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Appealing Results Of An IRS Tax Audit

Now if your IRS tax audit is not resolved, the results may be challenged. After the Revenue Agent has concluded the tax examination, the agent will issue a copy of the examination report explaining the agent’s proposed changes along with notice of your appeals rights. Pay attention to the type of letter that is included as it will dictate the appeals process available to you.

The “30-day letter”

The “30-day letter” gives you the right to challenge the proposed adjustment in the IRS Office Of Appeals. To do this, you need to file a Tax Protest within 30 days of the date of the notice. The Appeals Office is the only level of appeal within the IRS and is separate from and independent of the IRS office taking the action you disagree with. Conferences with Appeals Office personnel are held in an informal manner by correspondence, by telephone, or at a personal conference.

The “Notice Of Deficiency”

If the IRS does not adopt your position, it will send a notice proposing a tax adjustment (known as a statutory notice of deficiency). The statutory notice of deficiency gives you the right to challenge the proposed adjustment in the United States Tax Court before paying it. To do this, you need to file a petition within 90 days of the date of the notice (150 days if the notice is addressed to you outside the United States). If you filed your petition on time, the court will eventually schedule your case for trial at the designation place of trial you set forth in your petition. Prior to trial you should have the opportunity to seek a settlement with IRS Area Counsel and in certain cases, such settlement negotiations could be delegated to the IRS Office Of Appeals. If there is still disagreement and the case does go to trial, you will have the opportunity to present your case before a Tax Court judge. The judge after hearing your case and reviewing the record and any post-trial briefs will render a decision in the form of an Opinion. It could take as much as two years after trial before an Opinion issued. If the Opinion is not appealed to a Circuit Court Of Appeals, then the proposed deficiency under the Opinion is final and your account will be sent to IRS Collections.

IRS Area Counsel are experienced trial attorneys working for the IRS whose job is to litigate cases in the U.S. Tax Court and look out for the best interests of the Federal government. So to level the playing field, it would be prudent for a taxpayer to hire qualified tax counsel as soon as possible to seek a mutually acceptable resolution without the need for trial, and if that does not happen, to already have the legal expertise in place to vigorously defend you at trial.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), the San Francisco Bay Area (including San Jose and Walnut Creek) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you and if you are involved in crypto-currency, check out what a Bitcoin tax attorney can do for you.

Cannabis Rescheduling Hearing Indefinitely Stayed

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The prime benefits of reclassifying cannabis from a Schedule 1 substance to a Schedule 3 substance is that the Federal government would recognize medical benefits of cannabis, make Section 280E inapplicable to licensed cannabis operators, and open up financial and banking markets.

On August 26, 2024 the Drug Enforcement Administration (“DEA”) released its notice scheduling a hearing for December 2, 2024 on its proposal to lower the classification of marijuana to the less-dangerous level of Schedule 3.  DEA Administrator Anne Milgram said she would determine who will participate in the hearing and name a presiding officer to run the meeting.  If approved, the agency can then publish the final rule in the Federal Register.

John Mulrooney has been appointed as the Administrative Law Judge (ALJ).  On December 2, 2024 the DEA convened the initial hearing in the rescheduling process. The hearing was supposed to officially commence on January 21, 2025 and conclude during the first week of March; but on January 13, 2025 Mulrooney issued a ruling that included the cancellation of a hearing starting January 21st pending the outcome of a yet-to-be-filed “interlocutory appeal” to the agency’s eventual successor administrator which will be appointed by President-elect Donald Trump after he takes the oath of office.

How We Got Here …

The Associated Press reported on April 30, 2024 that the Drug Enforcement Administration (“DEA”) will propose a rule to reschedule cannabis to Schedule III under the Controlled Substance Act. The proposed rule has since been reviewed by the Department Of Justice and on May 16, 2024 has been published in the Federal Register. This publication then opened the period of time to July 22, 2024 for the DEA to take public comment on the plan to move marijuana from its current classification as a Schedule I drug, alongside heroin and LSD. The proposed rule moves cannabis to Schedule III, alongside ketamine and some anabolic steroids, following a recommendation from the federal Health and Human Services Department. More than 40,000 people submitted comment with a vast majority indicating favor of the proposed rule reclassifying cannabis.  But when two pro-rescheduling “designated participants” [those two being Village Farms International, a Florida-based agricultural firm that produces cannabis in Canada under a federal license there, and Texas-based Hemp for Victory] were denied to participate in the hearing filed an appeal, Mulrooney ordered a stop on the upcoming hearing with no new date set.

The Growing Trend In Legalizing Cannabis – Current Standings:

Medical marijuana is legal in 38 states and Washington DC, and soon to be 39 states with the passage of medical marijuana in Nebraska in the 2024 election

The medical use of cannabis is legal (with a doctor’s recommendation) in 38 states and Washington DC. Nebraska will soon be the 39th state to legalize it with the recent passage of the medical marijuana measure in the 2024 election. Currently, the 38 states with medical marijuana legal include Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Virginia, Washington and West Virginia. The medical use of cannabis is also legal in the territories of the Northern Mariana Islands, Guam and Puerto Rico.

Recreational marijuana is legal in 23 states and Washington DC

Twenty-three states and Washington DC, have legalized marijuana for recreational use — no doctor’s letter required — for adults over the age of 21. Those 23 states being Alaska, Arizona, California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, Rhode Island, Vermont, Virginia and Washington and the territories of the Northern Mariana Islands and Guam.

Recreational marijuana is legal in 6 tribal nations.

Six Tribal nations have legalized marijuana for recreational use.  Those 6 tribes being the Flandreau Santee Sioux Tribe (South Dakota), Oglala Lakota Sioux Tribe (South Dakota), Suquamish Tribe (Washington state), Squaxin Island Tribe (Washington State), Eastern Band of Cherokee Indians (North Carolina) and St. Regis Mohawk Tribe (New York).

Proponents Of The New Rule Argue That If Approved, Will Put Federal Law More In Line With State Laws.

Currently, under Federal law (Controlled Substances Act 21 U.S.C. 801) marijuana is designated as a Schedule I controlled substance due to the historical belief that it has a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision.

Proponents Of The New Rule Argue That If Approved, Will Result In A Tax Regime Similar To What Non-Cannabis Businesses Face.

Generally, businesses can deduct ordinary and necessary business expenses under I.R.C. §162. This includes wages, rent, supplies, etc. However, in 1982 Congress added I.R.C. §280E. Under §280E, taxpayers cannot deduct any amount for a trade or business where the trade or business consists of trafficking in controlled substances…which is currently prohibited by Federal law. Marijuana, including medical marijuana, is a controlled substance. What this means is that dispensaries and other businesses trafficking in marijuana have to report all of their income and cannot deduct rent, wages, and other expenses, making their marginal tax rate substantially higher than most other businesses.  Therefore, under current law, the Internal Revenue Code which treats businesses in the marijuana industry differently resulting in such business paying at least 3-times as much in taxes as ordinary businesses.

However, Even If The New Rule Is Approved, DOES NOT Change Reporting Of Cash Payments.

The Bank Secrecy Act of 1970 (“BSA”) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. The BSA requires any business receiving one or more related cash payments totaling more than $10,000 to file IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

The minimum penalty for failing to file EACH Form 8300 is $25,000 if the failure is due to an intentional or willful disregard of the cash reporting requirements. Penalties may also be imposed for causing, or attempting to cause, a trade or business to fail to file a required report; for causing, or attempting to cause, a trade or business to file a required report containing a material omission or misstatement of fact; or for structuring, or attempting to structure, transactions to avoid the reporting requirements. These violations may also be subject to criminal prosecution which, upon conviction, may result in imprisonment of up to 5 years or fines of up to $250,000 for individuals and $500,000 for corporations or both.

Marijuana-related businesses operate in an environment of cash transactions as many banks remain reluctant to do business with many in the marijuana industry. Like any cash-based business the IRS scrutinizes the amount of gross receipts to report and it is harder to prove to the IRS expenses paid in cash. So it is of most importance that the proper facilities and procedures be set up to maintain an adequate system of books and records.

So with all these potential benefits, what forces are present to block this proposed rule?

  1. Administrative Judge Mulrooney rules against rescheduling or as he ended up doing, put an indefinite stay on the hearing proceedings. His replacement has the same authority.
  2. Chevron Doctrine repealed by U.S. Supreme Court. The regulatory state has been in full force since, ironically, 1984, with the institution of the Chevron Doctrine. The Chevron Doctrine has required courts to defer to the expertise of administrative agencies when the legislative intent of an underlying law is ambiguous, which made it a cornerstone of how regulators and businesses interact. But on June 28, 2024, the Supreme Court’s Republican-appointed majority demolished the doctrine in its rulings in the Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo appeals, overturning the broad authority of the administrative state and raising fresh questions about how cannabis will be regulated moving forward. Keep in mind that rescheduling has been moving forward as a regulatory, rather than a legislative, change, and now, regulations do not hold the same force of law as they did since 1984. But even if the Chevron Doctrine was not repealed, the normal rule making process still faces certain congressional and judicial challenges explained further below.
  3. Congressional Challenges. Under the Small Business Regulatory Enforcement Fairness Act (also known as the Congressional Review Act), new final rules must be sent to Congress and the Government Accountability Office for review before they can take effect. “Major rules” (ones that are economically significant and require OIRA review) must be made effective at least 60 days after the date of publication in the Federal Register, allowing time for Congressional review. In emergency situations, a major rule can be made effective before 60 days. If the House and Senate pass a resolution of disapproval and the President signs it (or if both houses override a presidential veto), the rule becomes void and cannot be republished by an agency in the same form without Congressional approval. Since 1996, when this process started, Congress has disapproved only one rule. Congress may also exercise its oversight in other ways, by holding hearings and posing questions to agency heads, by enacting new legislation, or by imposing funding restrictions.
  4. Judicial Challenges. Individuals and corporate entities may go into the courts to make a claim that they have been, or will be, damaged or adversely affected in some manner by a regulation. The reviewing court can consider whether a rule: is unconstitutional; goes beyond the agency’s legal authority; was made without following the notice-and-comment process required by the Administrative Procedure Act or other law; or was arbitrary, capricious, or an abuse of discretion. An agency head can also be sued for failing to act in a timely manner in certain cases. If a court sets aside (vacates) all or part of a rule, it usually sends the rule back to the agency to correct the deficiencies. The agency may have to reopen the comment period, publish a new statement of basis and purpose in the Federal Register to explain and justify its decisions, or re­start the rulemaking process from the beginning by issuing a new proposed rule.

The most certain way that cannabis can be legalized and thus be treated like any other lawful business is by Congress enacting legislation. 

Top Democratic senators, including Senate Majority Leader Chuck Schumer (D-NY), continue to push the DEA to ‘promptly finalize” the rule to reschedule marijuana.  On August 2, 2024 Sen. Schumer, Sen. Cory Booker (D-NJ), Sen. Ron Wyden (D-OR) and others sent a letter to Attorney General Merrick Garland and DEA Administrator Anne Milgram imploring the administration to follow through on a proposal to move cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA), as the Justice Department formally proposed in May.  What is so surprising is that these legislators have the power to enact legislation completely bypassing the DEA’s rule-making authority and potential judicial challenges and send a bill to the President rescheduling cannabis or even excluding cannabis from the application of IRC Sec. 280E.

How Do You Know Which Cannabis Tax Attorney Is Best For You?

Given that cannabis is still illegal under existing Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government so it is best to be proactive and engage an experienced cannabis tax attorney in your area who is highly skilled in the different legal and tax issues that cannabis businesses face.  Let the cannabis tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), the Inland Empire (Ontario and Palm Springs) and other California locations protect you and maximize your net profits.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.