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hey everyone Jim briefs here from green growth CPAs and today we're gonna be talking about a very very important topic a compliance topic that many cannabis business operators are overlooking too frequently right so we're gonna talk about form 8300 and in this video we're gonna talk about everything cannabis operators need to know about form 8300 again my name is Jim breeze the chief marketing officer here at green growth CPAs to make this a little bit more timely and to really give you the gravity of what's gonna be happening here is that on MJ biz daily I saw an article about a former IRS attorney warning of upcoming tsunami of marijuana related 280e audits if you read through the article near the bottom of the article it talks about how the IRS chooses to play hard-nosed as possible and it can result in huge investigations into past all-cash dealings because any payment over $10,000 requires a filing of a form 8300 to disclose such payments to the IRS so as you understand cannabis is a pretty much all cash or cash heavy business and so you're gonna be filling out a lot of these forms if you're staying in compliance so I want to review all the information you need to know about form 8300 but before we get started I need to let you know that the information contained in this presentation is meant for guidance purposes only and not as professional legal or tax advice and further it does not give any personalized legal tax investment or any business advice in general so let's go over today's agenda so you know what we're gonna be covering in this video so first we're gonna talk about the importance of form 8300 what is form 8300 the form overview we're gonna walk through a little bit on that and cannabis companies in form 8300 why you guys need to really pay attention to this and not just sweep it under the rug we'll talk about relevant transactions that need to be filed for Form 8300 suggested standard operating procedures for Form 8300 in your cannabis company and then some additional tips on this form and how to really make the most of optimizing this in your SOPs in your daily accounting and all the things you need to know for your cannabis company so again recently our tax experts have heard reports of cannabis operators being penalized for failing to submit an IRS tax form 8300 so the IRS has been auditing cannabis businesses in Colorado to make sure the completing form 8300 because the cannabis industry again is heavily cash based and the IRS is strict about targeting cannabis companies for compliance with their many forms and regulations and all these things that are going on at the IRS so from their database at the IRS and also these other state databases that make cannabis companies register and make that information public the IRS is very much aware of what companies participate in the cannabis industry and as a result they can target their 8300 audits or any audit at that matter to this lucrative cannabis market and penalties can range from $100 per reportable transaction all the way up to $25,000 per transaction and cannabis operators you need to listen to this it's very important you may also face charges under money laundering laws if you hit a certain level of cash transactions without filing a form 8300 so the more successful you become the higher your risk is so you have to really pay attention to this form now it seems there's some confusion in the industry regarding this particular requirement to the detriment of the businesses all around the country not just Colorado or California anywhere within the United States and we can outline the policies and procedures that cannabis operators need to use to train their employees improve they have exercised due diligence in relation to the form 8300 enlarge $10,000 or more cash payments so in this video we're gonna talk about what you need to know to avoid gross negligence charges in case of an audit so let's just answer the question what is form 8300 I probably said it 15 times before I explain what it is but IRS Form 8300 was instituted in response to the federal government's concern over money laundering after 9/11 the form must be submitted by any business that receives $10,000 or more in cash in a single transaction or multiple related transactions form 8300 does not need to be submitted for personal checks cashier's checks bank drafts traveler's checks or money orders over $10,000 essentially this form needs to be filled out any time your business collects $10,000 are more in cash in this form does not need to be completed in a scenario where this amount of cash is collected from up giving to a person from another person right only in a business sense where there's a business entity involved even if it's for sale for example when you purchase a car off of Craigslist from person to person and there's no corporation involved that doesn't need to be filed as a form 8300 so as you see on the screen now this is what the form 8300 is it's a two-page form and it is a reporting document okay there's a few sections here you got about six sections here where you need to fill out information and this should be done during the transaction time don't wait till after because if you don't have one of these important pieces of information it's an incomplete filing an incomplete filing is better than not filing at all but get this information and show that confidence to the people that you're dealing and doing business with right because $10,000 is not a lot of money in the cannabis space when you're doing millions of dollars in business that could be you know very easily every day you'd have to fill one of these forms out but that's just what we have to do as cannabis and all cash business operators so to go over the section is real quickly here part one is the identity of the individual for whom the cash was received the person on whose behalf this transaction was conducted the description of the transaction and method of payment you have the business that received the cash for part 4 and on page 2 if there's multiple parties fill out those multiple parties there so it's not very complicated again it's just a basic filing requirement but failure to do this filing can result again in huge penalties and even money laundering issues in litigation against you or your company so really keep a close eye on this as we do some of our CFO on boardings we peel through the books we look at things and say okay well show me all the form 8300 for these 72 relevant transactions and then we get operators that look at us and say we don't have them we didn't even know we needed to fill them out ignorance does not absolve you from having to do this you still have to do this so whoever is your controller your CFO your accounting person in-house needs to let you know that you need to do this and if not you can also work with green growth CPAs we have our outsourced CFO service to actually make sure you're staying compliant in all of your cash transactions help you with your accounting and a myriad of other things to have to do with the cash and the accounting within your business but that's the form 8300 in a nutshell you can visit the IRS website to find more information to actually look at that form and then look at all the information they have that explains how to fill that out I don't want to go too deep into that so why do canvas operators need to use form 83 if it's not a parent by now let me reacquaint it to you in another term here so cannabis companies are being targeted by the IRS for failing to use form 8300 properly the authorities know that this is a cash heavy industry and are taking advantage of many operators lack of experience to institute steep fines and heavy penalties form 8300 again was put into place to combat money laundering tax evasion and other criminal activities associated with cash based transactions so protect your business by instituting robust standard operating procedures around completing form 8300 this will help your employees maintain compliance and keep your business safe that's the most important thing you try and preserve the integrity of your business and not fall you know just because of some simple IRS form it's not very difficult to fill out but it can have huge consequences if you brush over it so let's just review some relevant transactions that require our cannabis operation to file a Form 8300 so you have escrow arrangement contributions pre-existing debt payments negotiable instruments purchases reimbursement of expenses making or repaying a loan sale of goods or services including cannabis and cannabis products and if it's a non cannabis product say your cannabis company sells things other than cannabis right if you're one of those restaurants out in West Hollywood now that can do food and maybe someone comes in and does a very big party and pays in cash you need to file a form for that sale of real or intangible property rental of real or personal property exchange of cash for other cash and custodial trust contributions this is just a short list there are probably more but again anywhere where there's $10,000 or more changing hands from a person to a business or a business to a business is when you need to report a form 8300 so let's just discuss how to create a standard operating procedure for form 8300 in your cannabis company now standard operating procedures are critical to maintaining compliance as you hire employees and grow your business right it's not gonna always be you and your two co-founders you're gonna have to hopefully grow your business hire more people pushdown responsibilities to other people and having a set of SOPs or standard operating procedures make sure things are done the way you would want them to be done in form 8300 requires its own set of procedures to make sure you aren't penalized by the IRS so there are three basic steps here that I want to review for you again this is not the most robust SOP I'm just giving you some color of context to what that should look like for your company so step one gather the customer information so first your team needs to collect a certain amount of information from the customer pain that $10,000 or more in cash and the information you need to report includes the first and last name of the individual making the cash payment a taxpayer identification number or social security number of the individual making that cash payment their driver's license ID number in which government entity it was issued by the legal entity name of the customer or business the taxpayer identification or f ein of the customer or business and the address of the customer or business right so give your team direction as to where to securely store that customer information for future reference so if you have a consistent customer that comes quite often make sure that you are getting that information down so they know hey customer seven-to-one came in gave us the cash your internal people can look into a database that you may have it says all right this is the relevant information for that customer for our form 8300 now you move to step 2 collect payment information so make sure you get a cash receipt and store it with the second person who has access to the safe and maintains the cash log outline the proper checks and balances from making sure the person who collects the cash in the person who logs the cash our separate people are separate entities maintaining accountability and checks and balances after receiving the cash receipt a second person must do a few things verify that a receipt is provided or a signed invoice for the shipping manifest as proof of cash receipt being received ensure that key information for filing form 8300 is properly logged and saved in a secure filing system and log in to the cash log the following information their invoice number the customer name in the cash amount that is received once you get all that together and step three is best practices for regular compliance so your compliance officer whether in house or some kind of external outsourced person and the cash custodian should regularly review form a 300 transactions check cash logs see if there are payments that trigger the form 8300 reporting requirement and make sure all the information has been saved to complete the 8300 form and setup calendar reminders to make sure that these payments the information around these payments are submitted on time in form 8300 should be submitted weekly if necessary because if you're moving a lot of cash you probably have a lot of these don't wait I believe you have about 15 days of receiving payment to file this form which would be considered a timely basis so if you're submitting the forms manually you send it to the IRS down in Detroit there's an address you can look that up and send that form over before you do that make sure you're scanning all these forms into your computer put it into your Dropbox or Google Drive your onedrive somewhere in the cloud which we would call your data room so you have proof that you did fill these forms out and don't forget that your cannabis business must send through the correct taxpayer ID number or social security number of the person you receive the cash payment from when submitting the form and again filing the form 8300 within 15 days of receiving payment is considered a timely basis and note that if that 15th day falls on a weekend or a legal holiday the due date is following business day so let's get into a last few tips of filing form 8300 so in addition to the best practices we outlined in your standard operating procedure on the previous slide our tax experts and the following recommendations to help you file Form 8300 first you should sign up for a BSA e-file er and this is an online portal that supports electronic filing of Bank Secrecy Act forms the BSA forms ok and through this system you can add a customer transfer information and make the entire process more efficient for your business and on this when you're filing on a Mac computer we've noticed that if you use the Firefox browser and make sure you have Adobe installed the FinCEN networks works best with those tools sometimes if you have a different configuration it just doesn't work so a little quick tip for you on there and then what if you don't have the key pieces of information right what if you forgot to grab a piece of information so first it's not possible to e-file without all the required information so if you are missing the F ein the SSN or the legal name for example you must manually complete the 8300 forms and mail them in the IRS prefers that you still file an incomplete 8300 rather than not filing it due to missing details lastly what if you're filing an old or overdue form so our tax experts are CPAs and the people within our team recommend that you mail the form with tracking and attach a statement explaining the circumstances for late submission indicate that your company was not aware of the requirement and that since finding out about the requirement you have developed policies and procedures to comply with this requirement and that all owners and employees have been trained on these standard operating procedures it doesn't mean you're not gonna get a penalty but at least having some type of explanation is going to be helpful hopefully beneficial to you and your circumstance be proactive if you're worried about being penalized for an 8300 remember the goal of the form is to prevent money laundering so do everything you can to show that you run and above the board business with a legitimate interest in serving your customers and paying your taxes so to tie this all together to protect your business go through your books in file forms for any cash payments over $10,000 that you may have missed store all those form 8300 for up to 5 years in case of any audit that may happen and note that cannabis companies are required to notify customers that they have filed a form 8300 and you must do this on or by January 31st of the following year so for example if you file a form 8300 in this year 2019 you need to let that customer know if it's a transaction relevant to them say they paid you that $11,000 you need to let them know by January 31st 2020 that you filed a form for that remember the penalty to no file on a timely basis is at least $100 per occurrence so if you gross more than 5 million dollars per year in gross receipts the IRS can charge in penalties for not filing up to $500,000 like this is real real money so make sure you get used to filing this form regularly so thank you for taking the time to understand and listen to this video about form 8300 hopefully has brought you some value and understanding around the requirements and the reporting aspects of this form and if you need help with filing your form 8300 or cleaning up any of your compliance or bookkeeping then please reach out to green growth CPAs we'd love to help you out you can visit our website at green growth CPAs com or give us a call at eight hundred 676 or anything cash in cannabis we can help you out again one more time you can reach out to us via our website at green growth CPAs dot-com or give us a call at eight hundred 676