Cannabis C-Corps: Filing Requirements & Penalties for Not Extending
CannaBlog by Cory Parnell, COO and Principal at Bridge West CPAs and Advisors to the Cannabis Industry
Cannabis C-Corps are subject to specific filing requirements and penalties if they fail to comply with these requirements. This blog post will discuss the filing requirements for cannabis C-Corps and the penalties they may face for failing to extend their tax returns.
Filing Requirements for Cannabis C-Corps
Cannabis C-Corps are subject to the same federal tax requirements as other C-Corps. In addition, they must file Form 1120, which is the U.S. Corporation Income Tax Return. This form reports the company’s income, deductions, and credits and is due on the 15th day of the fourth month after the end of the tax year, typically April 15th.
Suppose the cannabis C-Corp needs more time to file its tax return. In that case, it must request an extension by filing Form 7004, the Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns. This form extends the filing deadline for an additional six months, giving the company until October 15th to file its tax return.
Penalties for Not Extending
If a cannabis C-Corp fails to file its tax return by the due date (including extensions), it may face penalties. The penalty for late filing is 5% of the unpaid tax for each month or part of a month that the return is late, up to a maximum of 25% of the unpaid tax. If the return is more than 60 days late, the minimum penalty is smaller than $435 or the unpaid tax.
In addition to the late filing penalty, the cannabis C-Corp may also face a penalty for late payment if it does not pay the tax owed by the due date. The penalty for late payment is 0.5% of the unpaid tax for each month or part of a month that the tax is late, up to a maximum of 25% of the due tax.
Conclusion
Cannabis C-Corps must comply with federal tax requirements, including filing Form 1120 and requesting an extension, if necessary, by filing Form 7004. Failure to file the tax return by the due date or not extending can result in penalties, including a late filing penalty and a late payment penalty. Therefore, cannabis C-Corps must meet their filing requirements to avoid these penalties. Please contact Cory Parnell, COO and Principal, with any questions at cparnell@bridgewestcpas.com or to schedule a consultation.
