Page 13 - CannabisOkMagOnlineMay2019

CANNABIS OKLAHOMA | MAY 2019 13

Many certifications sound great but may be nothing more than an online class. There are many qualified
accountants out there, but it is incredibly difficult for the average person to know. An accountant that is a
Certified Public Accountant has met very rigorous education, training, and testing requirements and it is
illegal for anyone to claim to be a CPA if they are not. CPAs are also required to complete 40 hours of con-
tinuing education classes every year. Whether you choose to go with a Certified Public Accountant or not, it
is incredibly important to understand who it is you select to entrust with the accounting of your business.

#3 Do you offer different levels of service? Many accountants that are focusing on the cannabis
niche only offer one level of service. They offer a high level of service, but with a high price tag.
Many of the cannabis startups are investing every dollar of capital in the business and do not
have thousands of extra dollars more each month. Regardless of the size of your business, you
as the operator are required to meet specific IRS regulations. Being advised by a CPA from the beginning
will prevent significant problems later. CPA’s that are interested in helping your business succeed can offer
advisory services at less cost and can provide the operator with valuable information about your business.
As the company grows, the service can evolve into a full-service offering that will free up the operators to
focus on running their business.

#4 Can you explain that a bit more? It is essential that your accountant explains some of the
basic concepts that a cannabis business needs to follow and why these concepts may cause
accounting fees to be more than usual for a small business. For example, the accounting ba-
sis that is chosen for your business. There are different accounting basis’s for companies and
discussing the specific differences are beyond the scope of this article, but your accountant should be able to
explain them to you. Most small companies use cash basis which is simple and therefore typically cheaper.
Accrual basis is used by large companies and is more complicated and involved. Unfortunately, cannabis
businesses, regardless of size, are required to use the accrual basis to take advantage of 280E deductions.
Your accountant should make you comfortable enough to ask clarifying questions, about these concepts or
any others, until you understand and are satisfied with the answers.

#5 Does my month to month accounting impact my year-end tax preparation? Currently, the
year-end tax preparation effort and expense are significantly affected by the effort put into
accounting throughout the year. The required accounting basis to take advantage of 280E de-
ductions, which is accrual accounting, is the most accurate and efficient if it is done monthly. It
will also provide more timely and useful information to the operator and allow better business decisions to
be made. If the choice is made to wait until year-end, there can be loss of accuracy and risk in the ability to
take advantage of the 280E deductions. There could also be a significant increase in the cost of year-end tax
preparation due to the added work required to calculate information that should have been done through-
out the year. Ultimately you as the taxpayer are responsible for your return regardless if you do them your-
self or have professional help.