Okay, so the past few weeks we’ve seen some psychotic behavior as it pertains to IRS. And yesterday, someone’s llelo (yes, it’s Utah, but that’s the best we’ve got right now) was mistaken for Anthrax and it caused the FBI and Hazmat to storm the building and leave with bodies wrapped up like mummies. If you’re getting worried that people might be freaking out, you’ve got some solid evidence in your corner.
The good news is that not everyone who hates the IRS with every fiber of their being is so cold that they’ll fly a plane into a building, shoot a gun at their spouse or destroy the very home they live in.
Michelle Lowry knows first-hand how much people hate the Internal Revenue Service.
The 37-year-old Leander woman, who processes forms for the IRS in Austin, confronts that venom regularly. People slip razor blades and pushpins into the same envelopes as their W-2 forms. They send nasty notes with their crumpled documents. Last year during the height of the Tea Party movement, hundreds of taxpayers included — what else? — tea bags with their returns.
“These changes appear to be limiting the scope of whistleblowers and the type of recoveries that would be eligible for an award. The fewer people eligible for rewards, the fewer people coming forward with information that might check out as tax fraud.”
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.
Okay, so the past few weeks we’ve seen some psychotic behavior as it pertains to IRS. And yesterday, someone’s llelo (yes, it’s Utah, but that’s the best we’ve got right now) was mistaken for Anthrax and it caused the FBI and Hazmat to storm the building and leave with bodies wrapped up like mummies. If you’re getting worried that people might be freaking out, you’ve got some solid evidence in your corner.