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How Do I Pay My Tax Without A Bank Account? and How Do I Avoid the 10% IRS Cash Tax Payment Penalty?

Part I. How Do I Pay My Tax Without A Bank Account?

So you have already done the impossible… you started a cannabis company, it is operating, AND it is making a tax profit. First off, congrats!

Now, how exactly do you pay that stinking tax bill? You don’t have a bank account, and you can’t just show up with a bag of cash and pay your tax right? Wrong! You not only can do it that way, you will have to do it that way without a bank account unless you are planning on going to 30 post offices to get 100 separate $1,000 money orders to pay that $100,000 tax bill. Doesn’t sound like something you will do? That’s because you won’t, so let’s get to reality here.

Remember that “taxes” aren’t just one government body, we are dealing with multiple states with varying issues, tax rates (some have no income tax at all). Even though below we will talk about the Federal side of things (since it applies to you all), do not forget that you need to do this same thing for your State and Local taxes, as applicable in your jurisdiction.

  1. Go online and find your nearest IRS Taxpayer Assistance Center (TAC). Not all TAC’s are created equal, as some will not accept cash payments. When I search zip code 97267 I get the below result:

  1. Once I click to make an appointment, I am taken to a list of close centers, where I am then able to see which services they provide. This is where you can make sure they take cash payments.
City Street Address Days/Hours of Service Telephone
Bend

250 NW Franklin Ave.
Bend, OR  97701

Monday-Friday 8:30 a.m. – 4:30 p.m.
(Closed for lunch 12:30 p.m. – 1:30 p.m.)

Services Provided

Office Information
541-706-5732

Make Appointment
844-545-5640

WAIT! Look at this below, this TAC doesn’t accept cash payments, good thing we checked!

  • Account inquiries (help with letters, notices and levies on your wages or bank account)
  • Adjustments (changes to tax account information or payments)
  • Alien clearances (Sailing Permits)
  • Assistance with Affordable Care Act tax provision questions for individuals
  • Basic tax law assistance January 1 – April 18 (answers related to your individual Federal Tax Return) (Topics)
  • Form 911, Request for Taxpayer Advocate Service Assistance
  • Form 2290, Heavy Highway Vehicle Use Tax Return (submission of tax return if unable to e-file)
  • Payment arrangements
  • Payments (check or money order only)
  • Procedural inquiries
  • Solutions to tax issues
  • Tax forms (All forms, instructions & publications are readily available online on IRS.gov. Availability is very limited in IRS offices)

*Does not accept cash payments

Good thing we didn’t just drive over there!

Good thing the Portland, OR IRS TAC accepts cash payments!

  • Account inquiries (help with letters, notices and levies on your wages or bank account)
  • Adjustments (changes to tax account information or payments)
  • Alien clearances (Sailing Permits)
  • Assistance with Affordable Care Act tax provision questions for individuals
  • Basic tax law assistance January 1 – April 18 (answers related to your individual Federal Tax Return) (Topics)
  • Check, money order, or cash payment acceptance (Exact Change is Required)
  • Form 911, Request for Taxpayer Advocate Service Assistance
  • Form 2290,  Heavy Highway Vehicle Use Tax Return (submission of tax return if unable to e-file)
  • Individual Taxpayer Identification Numbers and Form W-7  (More Information)
  • Payment arrangements
  • Procedural inquiries
  • Solutions to tax issues
  • Tax forms (All forms, instructions & publications are readily available online on IRS.gov. Availability is very limited in IRS offices)
Perfect, they take cash so we will make our appointment here

Once complete, you will have an appropriate appointment setup at the correct center where you can pay your IRS tax balance.

Tips for your meeting:

  1. Show up on time
  1. Do NOT try to get cute and pay in pennies or they will turn you away (yes they can say no to your money).
  1. You are going to be in a Federal building, leave your firearms, cannabis, or anything else at home or you may be in a Federal building for a lot longer.
  1. ALWAYS walk out with a receipt showing the payment as being applied to your correct account and the correct tax year!

PART II. How Do I Avoid the 10% IRS Cash Tax Payment Penalty?

If you are reading this, you likely have been hit with the infamous 10% “cash penalty” from the IRS. The below information should be very helpful to you, but please note it is for illustration only as the IRS abates penalties on a case-by-case basis. I am not saying your specific penalty/interest will be abated. (Sorry, making sure I don’t get cranky emails from people later!)

With the lack of access to banking, many cannabis companies are forced to operate solely in cash, and this includes making tax payments.

Hopefully, you already read my post on how to pay your taxes in cash. If not, take a look. In that post I mentioned that if you are declined by banks, that you should keep those letters. Well, here is why.

When assessed with the IRS 10% cash penalty applied to companies who do not use the required Electronic Federal Tax Payment System (EFTPS) you may be able to have the penalty abated by showing that you are “unbankable”. This was the case for Allgreens v. US in which case the cannabis company was able to have the penalties dropped. The IRS then made some changes to their Internal Revenue Manual wherein they provided some guidelines on having the penalty removed.

Okay Joe, great background, now let’s get to the meat and potatoes! How do I attempt to avoid the 10% IRS cash payment penalty already?! Please note that there was no precedent set in the Allgreens case, these cases are handled on a case-by-case basis, and you may or may not be able to get your penalty removed. But what is the harm? If it doesn’t work, you already owed the penalty. If it does work, it can save you thousands of dollars of unnecessary penalty payments.

  1. Apply for bank accounts every year. The Feds will allow up to 2 years, but it is in your best interest in a few ways to try to obtain bank accounts regularly. One, you may just get a good bank account and avoid all of this. Two, an annual (or even better semi-annual) attempt at obtaining banking shows a consistent attempt on your part. The IRS doesn’t remove this penalty for people who just decide to not try to get an account, so keep that in mind.
  1. Have a qualified CPA draft you a letter response to the IRS.
  1. SIGN the declaration letter.
  1. Send in the signed letter along with any and all documentation showing your attempts to obtain legal banking.
  1. Cross your fingers!
Joe Bailey

Joe Bailey

Joseph Bailey is a partner at BC Consulting. Prior to this, he had more than 10 years of experience working at PricewaterhouseCoopers, Deloitte, and New Era CPAs. During this time, he experienced many facets of taxation and business management, from international to individuals to entities, cannabis companies to Fortune 500 corporations, and everywhere in between.

Joe has been directly assisting the cannabis industry since late 2015 and loves to work with his clients to bridge the knowledge gap between the old cannabis industry and the new influx of strict business best practices that have become standard with legalization. He has a Bachelor of Science degree from California State University San Marcos and is an Oregon Certified Public Accountant.

Joe is married, has two daughters, and spends his time away from the office with his family out on adventures.

This Post Has One Comment
  1. On the other hand, it would be a simpler solution to contact our company: FINCANN and apply for a real, compliant, transparent checking account with an FDIC-insured bank. You may also apply for a B2C and/or B2C POS merchant account to eliminate the cash issue entirely!

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