What a $375 Cannabis Tax Allocation Audit Includes

If you run a boutique grow — call it 10,000 square feet of canopy and somewhere north of $600,000 in annual gross receipts, holding both a medical and an adult-use designation — you have probably heard me mention the $375 allocation audit and wondered what, exactly, that buys. Fair question. I would want the same thing spelled out before I sent anyone a dollar. So here is the whole thing, start to finish: what you provide, what I do with it, what you walk away holding, and where the line sits between this diagnostic and the real engagements it might point to.

What you provide

The inputs are deliberately light, because the point of a diagnostic is to get a defensible read without making you build pristine books first. I need your prior-year return — or, if it is easier, just the key numbers off it: gross receipts by activity, the COGS you claimed, and your total deductions. I need a rough canopy breakdown by designation: how much square footage runs medical versus adult-use. I need high-level overhead figures — rent, utilities, payroll totals — and your current allocation method, if you have one, whether that is revenue-based, square-footage-based, or none at all. Rough numbers are fine here. This is a diagnostic, not a filing; I am not asking you to close your books to find out whether closing your books is worth it.

What I do with it

Then I do the actual work. I recompute your medical-versus-adult-use allocation on a square-footage basis, which for most cultivation operations is the more defensible and usually the more favorable method — I explain why grow-room square footage carries so much weight in a separate guide in this library. I rebuild a full-absorption view of your COGS to see which indirect production costs you are leaving out, because that omission is the single most common way a grow overpays. I estimate the going-forward federal tax impact of a corrected method — for an operator at this scale that lands, illustratively, on the order of $10,800 a quarter, but that figure is an illustration of the mechanism, not a promise, and your real number only appears when I run it against your real books. I flag any prior-year §471 corrections that might support a defensible amended return — carefully, because retroactive relief is contested and the IRS is pushing back, which I cover in its own guide. And I screen for the adjacent risks that quietly sink cannabis operators: cash-reporting exposure under §6050I, payroll trust-fund exposure under §6672, and collection exposure if there is already a balance owed.

What you walk away with

You get a short written findings memo. Not a verbal "looks good," not a follow-up sales email — a document, from an Enrolled Agent, that says what your current allocation and COGS position is costing you, what a corrected method is worth, and what I recommend you do next. That recommendation is a plain yes or no on whether any further engagement is warranted: transition planning, a full COGS cost review, return signing, or IRS representation. And it includes the answer to the only question that actually matters to you — "is this worth my time?" — including, when the answer is no, the reassurance that $375 was a cheap way to find that out.

What the $375 is, and what it is not

Let me be precise, because the cannabis space is full of bait-and-switch. The audit is a genuine recomputation and a defensible read on your position, delivered in writing by a credentialed Enrolled Agent. It is not a full audit defense, a signed return, or a filed refund claim. It is a limited-scope diagnostic engagement — nothing more, and nothing hidden. If the diagnostic shows that return signing, a §280E cost review, or IRS representation is worth doing, those are scoped and engaged separately, under an engagement letter and, where representation is involved, a Form 2848. I will never turn a $375 diagnostic into a surprise. If the work is not worth it, I will tell you so and send you on your way; the entire point of pricing a diagnostic this low is to find the operators it genuinely helps and to let everyone else stop wondering.

Why it is priced where it is

That pricing is deliberate. $375 is set to remove the friction of finding out — low enough that the decision is easy, high enough that the people who book it are serious. The value compounds in the real engagements, not the diagnostic; the audit is simply the on-ramp that tells us honestly whether to drive down that road. For the target segment — roughly $600k in gross receipts with, illustratively, something on the order of $10,800 a quarter potentially at stake — $375 is trivial against the downside of continuing to file the wrong way. The only open question is whether your numbers actually fit that profile, and that is exactly the question the audit answers.

The ten-minute fit call

After I have run the recomputation, we get on the phone for ten minutes. I walk you through the findings and the recommendation, you ask what you want to ask, and you leave the call knowing three things: what your current position is costing you, what a corrected method would be worth against your numbers, and whether it makes sense to engage further. No pressure to decide on the call. The memo is yours either way.

What to bring

1. Your prior-year return, or the key numbers off it.
2. Your canopy by designation — medical square footage versus adult-use.
3. Your overhead totals — rent, utilities, payroll.
4. Your current allocation method, if you have one.
5. Ten minutes for the call.

That is the entire commitment.