A federal grand jury has indicted West Carrollton club owner and Brookville resident Stanley W. Combs III on the charges of one count of operating an illegal gambling business and four counts of making false statements on federal income tax returns…
…The indictment alleges Combs substantially under-reported the income he received as the owner and operator of Fraternal Order of Orioles, Nest 293 at 842 Watertower Lane in West Carrollton and a related entity at 10955 Lower Valley Pike in Medway, Ohio.
There’s no indication that an H&R Block employee advised this particular alleged tax dodger but better to be prepared.
Related: Did anyone tell these crazies in Ohio that they can get help FOR FREE tomorrow? For crissakes, there’s even one in Dayton at 200 W. Second St. Pull yourself together Buckeye State.
How much tax would you pay on April 15 if the IRS couldn’t levy on your bank account, slap you with a lien, charge you penalties and interest, or send you to jail? Not much, eh? Then ponder the rules forcing individuals to buy “minimum essential coverage” under Obamacare.
The forced purchase of insurance is key to Obamacare. The “personal responsibility requirement” – a funny name for a requirement imposed by the state – is needed to make sure that low-risk individuals buy insurance to help keep it affordable for high-risk buyers (or, less politely, healthy young men are forced to subsidize everybody else). The penalty is considered vital to any semblance of fiscal soundness for the program. The rule is backed up by penalties and will be collected on tax returns.
The reaction of healthy young men in 2014 when this penalty kicks in will be “Dude. You’re not serious.”
And they will be right.
Caleb noted this yesterday from the Joint Committee of Taxation explanation of the penalties (my emphasis):
The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.
If we take them at their word – and new Code Sec.5000A(g)(2) seems to say just this – why would any sensible taxpayer ever pay the penalty?
• They can’t threaten you with jail.
• They can’t hit you with a lien.
• They can’t levy your accounts.
• There’s no interest charge, so even if you do pay it late somehow, you’ve had the interest in the meantime.
We tax preparers probably won’t be allowed to recommend non-payments to our clients, or we will be silenced by our new IRS preparer enforcement overlords, but people will figure it out in a hurry. And if you think that people will pay taxes anyway without the threat of collection, penalties or interest, then why are we wasting any money funding the IRS?
Apparently there’s been a bit of unnecessary confusion out there about the deductibility of marijuana for medical purposes. The Wall St. Journal article that we linked to this morning discusses the problems employers are encountering wi e.g. can’t use HSA funds; they don’t care if you’ve got a card, if you test positive you’re fired).
But the question of deducting the cost of your White Widow et al. that you legally purchase in states like California and Colorado has been making the rounds. After a little discussion, it’s pretty clear that the IRS is not going allow you deduct your pot for tax purposes simply because it’s still illegal at the Federal level. Doctor’s note be damned.
The confusion arose due to the following letter that was sent to New York Senator Chuck Schumer, who had sent a letter to the IRS inquiring about a constituent using a “herb” to treat migraine headaches:
As with many facets of how to treat medical marijuana for tax and other purposes, it appears that those in charge are merely tiptoeing around the question. In the letter, the term “marijuana” is never used explicitly – the term used is “herb”. While it’s my understanding that the specifics of the case involved medical marijuana used for the treatment of migraines, that isn’t specifically stated in the sanitized version of the letter. No use of “marijuana”, just the term “herb.” That could be St. Johns Wort or milk thistle as far as the IRS is concerned.
Fortunately TaxProf Paul Caron clears up for us in a couple of updates from his latest post on this issue:
Update #2:Rev. Rul. 97-9, 1997-1 CB 77, specifically precludes a medical expense deduction for medical marijuana:
An amount paid to obtain a controlled substance (such as marijuana) for medical purposes, in violation of federal law, is not a deductible expense for medical care under § 213. This holding applies even if the state law requires a prescription of a physician to obtain and use the controlled substance and the taxpayer obtains a prescription.
So the IRS in Info. 2010-0080 either was (1) signalling a retreat from its position in Rev. Rul. 97-9 by not mentioning the federal legality of the substance; (2) implicitly referring only to legal herbs (and hence not covering marijuana).
Update #3: I am told by an enterprising reporter that the herb in question in Info. 2010-0080 is Petadolex, so it appears that interpretation #2 above controls and the conclusion in Rev. Rul. 97-9 denying a medical expense deduction for medicial marijuana still obtains.
So there you have it. Regardless if you have glaucoma, cancer, HIV, chronic pain, high anxiety or any ailment that marijuana can effectively alleviate, don’t bother trying to include it on Schedule A. We’d ask the IRS to implore a little common sense here but legally, as long as marijuana remains illegal at the federal level that’s not going to happen. And from a more practical standpoint, we’re still talking about the IRS.
