Generally, taxpayers have a three-year window after filing their tax return to amend the return and file a claim for refund. This window gives taxpayers the flexibility to alter their original filings should they discover a mistake or omission, or if the preparation did not properly adhere to tax law and regulation.
A protective claim for refund allows for an extension of the three-year window if the taxpayer’s right to a refund is contingent upon future events. In the uncertain and ever-changing regulatory landscape of the cannabis industry, these protective claims can be extremely valuable. For example, should IRC § 280E be found unconstitutional, these claims would protect a taxpayer’s right to dig up old tax returns that would otherwise be “untouchable”, recalculate their taxable income and tax liability with the inclusion of previously non-deductible operating expenses, and recover those long lost tax dollars.
Protective claims have great potential but, to be useful, they must be timely filed and accurately prepared. Protective claims must be filed prior to the expiration of the taxpayer’s original statute of limitations – the three-year window mentioned above. So, don’t wait to explore the topic with your professional adviser. Contact the Calyx team to learn more.
“I switched over to Calyx a few years ago after my dispensary returns resulted in hundreds of thousands of dollars in tax liability. They found multiple significant errors, and were able to legally reduce my tax liability.”