Former US Tax Federal Prosecutor – Local Denver Metro Area Tax Attorney & CPA
Boog & Cruser, P.C.

Colorado Tax Law Blog

July 1, 2014 Changes to Offshore Programs

On June 18, 2014 the IRS announced major changes in its offshore voluntary compliance programs. The changes include an expansion of the streamlined filing compliance procedures announced in 2012 and important modifications to the 2012 Offshore Voluntary Disclosure Program (OVDP). The expanded streamlined procedures are intended for U.S. taxpayers whose failure to disclose their offshore assets was non-willful. In addition, on July 1, 2014, the new information reporting regime resulting from the Foreign Account Tax Compliance Act (FACTA) will go into effect. Thousands of foreign financial institutions will begin to report to the IRS the foreign accounts held by U.S. persons.

IRS Audits of Marijuana Dispensaries in Colorado are on the Rise

Perhaps the biggest problem facing medical marijuana dispensaries are the federal tax consequences of operating such a business. While Colorado state voters have legalized marijuana, the IRS still considers marijuana dispensaries to be drug traffickers under federal law and IRS audits of marijuana dispensaries are on the rise.  Section 280E of the United States Tax Code provides that no deduction or credit shall be allowed for any amount paid or incurred during the taxable year when the expenses are incurred in connection with the trafficking of a controlled substance. The disallowance of expenses is a very harsh punishment for businesses because businesses typically pay taxes on their net, not their gross income. It is important to note that cost of goods sold is not a deduction but is subtracted from gross receipts in order to determine a taxpayer's gross income. Thus, a dispensary who maintains sufficient records should be permitted to reduce their gross receipts by their cost of goods sold. Ultimately, the federal tax consequences could effectively put dispensaries out of business.

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Boog & Cruser, P.C.
3333 South Wadsworth Boulevard
Suite D-201
Lakewood, CO 80227
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