Federal return preparation under Section 280E
Your federal return has to reflect a defensible cost of goods sold figure, correctly disallow non-COGS operating expenses, and reconcile cleanly to your books throughout the year rather than being reverse-engineered in April. We prepare federal returns from the same monthly-reconciled financials we maintain during the year, so the numbers on the return match the numbers a bank, investor or IRS examiner would find in your books.
Colorado return preparation and the state subtraction
On the Colorado side, we prepare your Colorado C-corporation, partnership or individual return starting from your federal taxable income, then apply the Colorado state-level subtraction for expenditures disallowed under Section 280E. Because Colorado income tax applies at a flat rate, an accurately calculated subtraction has a direct and often significant effect on the dollars actually owed to the Department of Revenue.
We also prepare and reconcile your ongoing DR 0100 retail sales tax filings and excise tax remittances so your annual income tax return and your monthly/quarterly tax filings are consistent with each other.
Quarterly estimates and cash flow planning
Because 280E can push a cannabis business's effective federal tax rate well above what a similarly sized non-cannabis business would owe, quarterly estimated tax planning is essential to avoid a surprise balance due that outstrips available cash. We project your federal and Colorado liability quarterly and adjust estimated payments as your revenue and cost structure change through the year.
Coordinating federal returns with the Colorado flat-rate return
Because Colorado income tax applies at a flat rate to Colorado taxable income, the accuracy of your federal starting point — and the size of the state 280E subtraction you claim — has a direct, dollar-for-dollar effect on your Colorado liability. We prepare both returns together so nothing is inconsistent between them.
