Taking on a summer job can be hotter than ever when procuring one in the cannabis industry. The New York Times recently published an article which highlights the fast growth of marijuana-related job listings and internships on job sites.
A simple Google search for cannabis Intern turns up around 340,000 results. Cannabis jobs are not only very cool for young interns, but they are often rewarding on a personal level. Including an internship has benefits both to the student and the company that takes them on.
In regards to the cannabusiness, interns have no exemption from their employment tax obligations, and as with other small businesses, they often need to make quarterly tax payments.
But what are the tax considerations and benefits in hiring an intern to help you in your cannabusiness?
Yes, tax for internship reimbursement should be included in gross income as compensation. Make sure to include interns in the conversation about their taxes so there are no misunderstandings or surprises. All reimbursements must be included in the intern’s W-2 and are subject to withholding for income and payroll taxes.
These expenses should not be treated as business expenses as the courts have determined the intern’s home to be the summer job location. According to the IRS, “U.S. law requires that J-1 Interns and Trainees pay federal, state and local taxes on income earned while in the United States. This includes income from salaries, wages, and tips.”
As a cannabis business owner, your paid intern should receive a W-2 Form before they file their taxes which shows their total earnings, as well as the amount of taxes they already paid.
Interns offer a fresh new perspective on organizational issues. They tend to challenge the way things have been done in the past and bring fresh, new ideas to the company. Interns often can see a better way at doing things and often are good at suggesting new methods or questioning processes that a manager may not have considered thought about before.
Internships matter more than ever. The hunt for needed talent is real and today’s companies are using internships as a strategic means of advancing their recruitment efforts to win-over top candidates. Internships are the best way to get a head start on the recruitment process while giving human resources a chance to see prospective employees in action and vice versa.
Social media, computer programs, iPads are all a piece of cake for young professionals. And, although you consider yourself an entrepreneur in the cannabis world, you can always use a hand from a fellow technology-savvy professional. Interns acquire an ease with the use of technology.
Internships enhance a company’s social strategy and presence. An intern can help you spread the word about your company, especially if they have a positive experience. They’ll talk about you to their friends, family, and other students, raising your social visibility and public awareness. And since the cannabis industry is so hot right now, dispensaries can also use these programs as an opportunity to build their brand and differentiate themselves from other employers.
Interns and Trainees on a J-1 Visa are required to file Form 1040NR-EZ with the IRS for their federal U.S. individual income tax returns. The 1040NR-EZ form is available with filing instructions from the IRS website. Interns will need some support at the beginning. So be sure to guide them.
For interns, their experience with your company goes beyond what happens within the office. Prior to starting a program, interns may need to find housing and perhaps roommates. They’ll also have a lot of out-of-pocket expenses, and questions, as they settle into their new communities. To ensure a positive experience, employers should identify interns’ needs and plan accordingly.
In consideration, give interns a single point of contact to answer questions and facilitate a smooth transition. It would be a good idea to provide interns with resources to secure housing or if they should need roommates. Make it easy for interns to submit expenses and receive quick reimbursement and don’t forget to educate them on how their expenses and taxes will be managed.
Having an intern is a trial period that could lead to something more. An internship is a great way to see how much potential a student or recent graduate has in the field. You’ll get to see their skills and work ethic as an intern and you might choose to bring them on as a paid employee down the line.
If you hired and paid an intern, what you paid them is tax-deductible. In the U.S., if you pay an intern more than $600 in a year, it needs to be reported and they need to receive a W9. For example, budtenders make more money than bartenders, retail salespeople, and pharmacy aides.
State and local taxes for internships may have also been withheld from paychecks. This depends greatly on the state you were working in. Some states do not have a personal income tax; others may tax income as much as 8%. Similarly, local taxes will vary but will be lower than state taxes. Make sure they understand this matter.
Interns are also great with projects or tasks that you’re struggling to complete. An interested candidate takes on an internship in hopes of accomplishing something to use on their resume or in future interviews. Give them real, meaningful work that will help your organization run smoother, accomplish more, or be more successful.
The need for internships has evolved, so an employer’s approach must evolve, too. See your internship for what it is, which is a chance to continuously staff your company with talented employees. Also, see your interns for who they are, which are prospective employees with needs that transcend the office space.
Set up a savings account for yourself as a business owner. If you have your own cannabusiness, you’ll need to set aside a certain percentage of the money you earn to pay the IRS. An easy way to do this is by transferring a certain portion of the money into a savings account.
Pay attention to the quarterly estimated due dates throughout the year – April 15th, June 15th, September 15th, and January 15th. These are the deadlines for you to send tax payments to the IRS.
After all, you are gaining brand advocates. Hiring an intern helps spread the word about your company, whether you mean to or not. If you’re an impressive internship supervisor and mentor, your interns will probably talk about their experience with peers, friends, and family members, essentially advertising for your organization.
Internships connect employers with the community, including colleges and universities. This offers the opportunity to build strong relationships with up-and-coming talent through mentorship and training. An active internship program helps you build a steady pipeline of young and qualified talent who could well become your next star employee.
These are only five great reasons why you should institute an internship program, but there are plenty of other benefits to consider too. The bottom line is that today’s interns are tomorrow’s leaders. Have a hand in creating the future for our cannabis industry.
And as your cannabusiness continues to grow, we can help you meet your accounting needs and beyond. Accountabis Advisors are here to help. From weekly bookkeeping, payroll processing, payables/receivables, internal audit, and inventory control, we can help you every step of the way. Contact us at AccountabisAdvisors.com or call (844) 276-2545. Be sure to also like us and follow us on Instagram.