What Happens During a Cannabis IRS Audit?

What Happens During a Cannabis IRS Audit?

Step-by-step explanation of what happens during a cannabis IRS audit, including document requests, bank review, and 280E recalculations.

What This Page Covers

  • Audit notice
  • Document requests
  • Bank and POS review
  • 280E recalculations
  • Audit outcomes

Step 1: Notice of Audit

The IRS sends written notice identifying the year under review.

Step 2: Document Request

Common requests include:

  • Tax returns
  • Bank statements
  • POS reports
  • Payroll filings
  • General ledger

Step 3: Bank Record Review

Deposits are compared to reported revenue.

Step 4: 280E Review

COGS allocation is reviewed carefully.

Improper expense deductions may be reversed.

Possible Outcomes

  • No change
  • Additional tax owed
  • Penalties and interest

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