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Cannabis Businesses: Year-End Payroll Checklist (2026)
Year-end payroll for cannabis businesses is W-2s and any 1099-NEC to employees and contractors by January 31, the fourth-quarter 941 and annual 940, and the cannabis business items that decide which boxes are right: IRS Cannabis industry. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Cannabis business items that shape the W-2 and 1099s
Any person in a trade or business that receives more than $10,000 in cash in a single transaction or related transactions must file Form 8300 within 15 days after receiving the payment. The IRS accepts cash tax payments from unbanked taxpayers at some Taxpayer Assistance Centers by appointment.
IRC section 280E disallows all deductions or credits for a business that traffics in marijuana, even where the sales are legal under state law, but the business may still reduce gross receipts by cost of goods sold calculated under section 471. A dispensary may not deduct advertising or selling expenses.
A state-compliant marijuana dispensary has the same income and employment tax filing obligations as any other business. The IRS states that illegal businesses have no exemption from their employment tax obligations, and businesses in the industry face the same late filing, late payment and accuracy penalties as any other taxpayer.
The January calendar
W-2s and W-3 to the SSA and copies to employees by January 31; 1099-NEC for each contractor paid $2,000 or more in the year, the threshold for tax years after 2025, by the same date; Form 940 and the fourth-quarter 941 by January 31 as well, with a 10-day extension where all deposits were on time. Ten or more information returns of any kind, counted together, must be filed electronically. For cannabis businesses the reconciliation that matters is that the pay codes for 280E tax code payroll deductions, cash payroll documentation and state cannabis board reporting landed in the right W-2 boxes for every employee.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- Any person in a trade or business that receives more than $10,000 in cash in a single transaction or related transactions must file Form 8300 within 15 days after receiving the payment. The IRS accepts cash tax payments from unbanked taxpayers at some Taxpayer Assistance Centers by appointment. [IRS Cannabis industry]
- IRC section 280E disallows all deductions or credits for a business that traffics in marijuana, even where the sales are legal under state law, but the business may still reduce gross receipts by cost of goods sold calculated under section 471. A dispensary may not deduct advertising or selling expenses. [IRS Cannabis industry frequently asked questions]
- A state-compliant marijuana dispensary has the same income and employment tax filing obligations as any other business. The IRS states that illegal businesses have no exemption from their employment tax obligations, and businesses in the industry face the same late filing, late payment and accuracy penalties as any other taxpayer. [IRS Cannabis industry frequently asked questions]
Read the full guide to how to handle year-end payroll and W-2s, and the rest of the cannabis business payroll library.
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Frequently Asked Questions
Year-end for cannabis businesses: IRS Cannabis industry
Any person in a trade or business that receives more than $10,000 in cash in a single transaction or related transactions must file Form 8300 within 15 days after receiving the payment. The IRS accepts cash tax payments from unbanked taxpayers at some Taxpayer Assistance Centers by appointment.
Year-end for cannabis businesses: IRS Cannabis industry frequently asked questions
IRC section 280E disallows all deductions or credits for a business that traffics in marijuana, even where the sales are legal under state law, but the business may still reduce gross receipts by cost of goods sold calculated under section 471. A dispensary may not deduct advertising or selling expenses.
When are W-2s and 1099s due for a cannabis business?
January 31 for both, to the recipient and to the SSA or IRS. The 1099-NEC threshold is $2,000 for tax years after 2025, and 10 or more information returns of any type must be e-filed.
What does managed payroll cost for a cannabis business?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. 280E tax code payroll deductions, cash payroll documentation and state cannabis board reporting are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Cannabis Businesses. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Understanding Employment Taxes
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