Keep insurance and tax records aligned for a cannabis business

Do not turn an insurance article into tax advice

A broker can help identify the policies and insured entities, but a qualified tax adviser should determine the tax position.

Build a clean record

• Legal entities, tax classifications, ownership, licenses, and locations
• Policies, endorsements, invoices, payment records, and coverage periods
• The business activity and entity associated with each insured exposure
• Allocation methods used for shared locations, payroll, property, vehicles, or services
• Claim notices, adjuster correspondence, payments, deductibles, and expense support
• Written advice from the qualified tax and legal professionals responsible for the position

Recheck federal developments

Recheck the IRS and the controlling federal sources when the account is reviewed and before relying on a tax conclusion.

Create a clean broker-to-adviser handoff

Start with a policy schedule that identifies each insured entity, policy period, invoice, payment, and covered location or activity. The tax adviser can then evaluate the records against the taxpayer's facts without having to reconstruct the insurance arrangement from scattered documents.

Keep claim proceeds, deductibles, professional expenses, property costs, lost income, and other amounts separated in the underlying records. The broker can explain the policy documents and payment history, while the tax adviser determines the appropriate treatment and allocation.

• Reconcile policy names and addresses with the legal-entity records
• Identify shared costs and the written method used to allocate them
• Keep the claim file connected to invoices, payments, and supporting expenses
• Record the source and date of any legal or tax conclusion used by management