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IRS Audit Representation for Cannabis Businesses in Minnesota
Examinations of cannabis returns are routine. Preparation, not panic, determines the outcome.
Cannabis returns draw examination attention because Section 280E creates a predictable set of issues: cost of goods sold, inventory methodology, related-entity fees and unreported cash.
We represent Minnesota operators through the process, manage the information document requests and keep the examination inside its stated scope.
How we run a defense
Control of the record is most of the work. Responses go out complete, on time and no broader than the request — volunteering documents is how a narrow examination becomes a wide one.
- Assessment of exposure across all open years before the first response
- Information document request management and evidence assembly
- Cost accounting reconstruction and support where documentation is thin
- Direct communication with the examining agent
- Appeals coordination where a proposed adjustment is unsupported
- Minnesota Department of Revenue examinations and sales tax reviews
The issues that come up
Nearly every cannabis examination touches the same four areas: whether capitalized costs belong in inventory, whether the taxpayer is a producer or a reseller, whether related-party charges have substance, and whether cash receipts are complete.
Operators with contemporaneous cost documentation and a clean cash control record resolve these quickly. Operators without them negotiate from a weak position, which is why we push documentation years before it is needed.
If we did not prepare the return
We take representation engagements for returns other firms prepared. The first step is an honest assessment of what is defensible, because a client is entitled to know the range of outcomes before spending money on the fight.
Frequently asked questions
Should the owner speak with the examiner?
Rarely, and never without preparation. Representation exists so that answers are complete, accurate and confined to the question asked.
How long do these examinations take?
A focused single-issue review can close in a few months. Multi-year 280E examinations frequently run a year or longer, particularly if they go to Appeals.
Can penalties be abated?
Sometimes, where reasonable cause exists and positions were taken in good faith with professional advice. It is fact-specific and we assess it case by case.
Received an IRS notice?
Do not respond before the exposure is assessed. Call us and we will review the notice with you.