As previously mentioned, the Canadian tax code distinguishes between income you receive from activities you engage in and things you store or store your money on.
In order to determine if a money transfer is a payment for an activity or a storage account, the bank will evaluate the funds. If they accept deposits without questions, then it is considered a payment for an activity.
Included in this criterion are bitcoin transactions, due to the widespread acceptance of bitcoin as a medium of exchange. As of now, there are only two banks that recognize bitcoin as legal tender: Union Bank and TD Bank.
There are no regulations regarding how large personal bank accounts must be or what kind of investments are allowed. This makes it difficult to keep an eye on account size and suspicious activity.
Submit your marijuana-related expenses for tax deduction
If you have a business that deals in cultivation, storage, distribution, or sales of cannabis, you may be eligible for a tax deduction. The amount of your expenses can be counted as business expenses on your income tax return.
The legal limit to which you can claim your business expenses is 15% of your gross income. Your overall taxes will be lower if you claim more than this amount due to the lower capital-gains tax rate currently in place.
Of course, before you can claim your deductions, you must first prepare your financial statements and submit them to the authorities for review. This takes time and effort that could otherwise spend on enjoying yourself and having a good time.
If you are going to take advantage of this provision and claim the business-expense deduction, do not count on getting any good-time money before the IRS awards it to you.
Hire a professional tax preparer who is knowledgeable about cannabis tax laws
If you have money to spend as a cannabis user, you should be getting help from a professional. It is important to understand how the Cannabis Tax Law applies to your personal finances.
As a cannabis user, you should hire a professional tax preparer who is knowledgeable about cannabis tax laws. This allows the preparer to advise you on what amounts of marijuana you can purchase and what types of purchases are tax-wise correct.
The amount of taxes that you need to pay for marijuana can be high. As a beginner, it is best to ask for help from a professional who can give correct amounts of money needed for taxes and initial bills.
Incorporate your cannabis business
Now, this may sound weird, but you should actually take a moment to educate yourself about your business. If there are things that you do not understand about your business, or if there are regulations that apply to you, then you should get educated about them.
There are many books on business etiquette, ways to properly market your product, and even how to accept payments from customers. There are even online resources for this kind of business information.
Once you do this, it will help add more credibility to your business and make people want to work with you, because they got some good info from somewhere. You will also reduce the chance of someone cheating you out of their money because of lack of knowledge.
Maximize your personal and business tax deductions
For many people, tax time can be more stressful than filing a tax return. This is due to the many deductions and credits that the IRS permits you to claim.
Of course, not all tax deductions are equal. Some are for business expenses, and some for personal expenses. Some are for taxes paid in the US versus taxes paid in a country that does not have an US federal tax system.
Some of the most popular personal and business deductions include property taxes, alimony payments, education costs, income payments to cover living expenses, and debt payments. All of these must be accounted for when preparing your tax return.
Prepare and file your taxes properly
Before you can start filing your taxes, you must first understand what taxes you must pay and how to file a tax return. Filing your taxes is a great way to learn more about yourself and how you think and processes money.
Many people fail to realize that the income they receive from investments and salary sources is taxed at a different rate than money received from selling recreational or medical cannabis.
While it may seem counterintuitive, filing a tax return can be a very relaxing process. By doing so, you gain an understanding of your yearly income and the rates applied to it.
This is especially true if you are not sure what deductions you need to take on your annual income. Having the ability to write off marijuana expenses will add an extra layer of relaxation before fil ing the return.
Get an extension if you need one
If you need an extension, there are several times when marijuana can be added to your tax preparation routine. The most common of these is during the early stages of your business, where you are adding staff and they are learning new tasks and deadlines.
Many places have a minimum time frame before they will add items to their filing system. So, if you needed your cannabis products filed as property assets on your company account immediately, you would have to apply for that time frame to be met.
The same goes for extensions! If you need a second extension, then take advantage of the early access program. It gives you access to the state before anyone else does, giving you an extra day to prepare your application!
As mentioned earlier, state agencies use a form called Application for Permission to Operate as a Cannabis Industry Business (ACOICB). This file all the requirements with the state and gives them permission to run an ACOICB.
Pay any owed taxes before the deadline
If you are not required to pay taxes on your income, and the deadline is close at hand, it is time to start getting ready. You can save considerable amounts of money by filing your taxes before the deadline.
There are several ways to file your tax return. You can do it using the traditional method, or you can use the Filing Refund Age Option. Both have their benefits and costs.
Title wise, you would have your income, deductions, and any credits. The differences between these two ways of filing are how much money you would receive in refunds and what things you would get credits for.
The way each title gives its benefits is by using a form or item in their preparation process. For instance, if one uses the traditional way to file their tax return, then they would take into account all their deductions and credits when determining what income was owed.
Keep good records for your cannabis business and personal use activities
While it may seem like a waste of time to keep records for your business when you are still in the early stages of establishing it, you will thank yourself later for doing so.
As your business grows, additional records must be created to reflect charges, receipts, and other information. From the beginning, to more established businesses, accounting services can offer a cost-savings.
Some people prefer to keep detailed records for personal use activities such as gardening, hobbies, or other non-business pursuits. You can either choose one service company or do a joint ventures where you both take turns recording the records.
Including information about cannabis uses in your record-keeping routine will help preserve evidence of your business activity and help the authorities understand your role in the business.
