Marijuana
President Trump has hinted that he may ease restrictions on marijuana… Possibly reclassifying it from a Schedule I drug to a Schedule III drug. Under the Controlled Substances Act, drugs are sorted into five schedules, based on their medical use and their abuse or dependency potential. Marijuana is now a Schedule I drug, the highest level, along with heroin, LSD and ecstasy. In 2023, the Health & Human Services Dept. advised reclassifying it to Schedule III, a category that includes Tylenol with codeine, anabolic steroids and ketamine. In May 2024, the Justice Dept. proposed rules to downgrade marijuana to Schedule III, but those regulations have not yet been finalized, nor have they taken effect. Any final decision by the Trump administration on this remains uncertain, but some believe it could come soon. Opponents are lobbying against any downgrade.
Rescheduling marijuana to a Schedule III drug has tax and other impacts. If the administration adopts final rules that downgrade the drug, marijuana firms in states in which cannabis is legal could engage in banking and interstate commerce, and deduct expenses on their federal income tax returns. Federal tax law Section 280E prohibits businesses that traffic in Schedule I or Schedule II drugs that are illegal under federal law from claiming business expenses, other than cost of goods sold, on their federal income tax returns. It’s irrelevant that weed is legal under the laws of the state in which the marijuana seller is located. If marijuana is downgraded to Schedule III, then legal marijuana firms can deduct their business expenses.
Gambling
If you gamble, remember these rules: All gambling winnings are taxable. For 2025, casinos, etc. will file Form W-2G with IRS for winnings of $1,200 or more in bingo or slots, $1,500 or more in keno, or over $5,000 in poker tournaments. Online sports betting sites should file the W-2G for winnings greater than $600. The $600, $1,200 and $1,500 reporting thresholds could rise in 2026 to $2,000. Most people report their gambling winnings on Schedule 1 of the 1040.
Gambling losses are deductible, subject to two important conditions: First, only taxpayers who claim itemized deductions on Schedule A of the 1040 can claim gambling losses. If you take the standard deduction, you are out of luck. Second, for 2025 and earlier years, losses are deductible only to the extent of winnings that you report on Schedule 1. Note, beginning with 2026 federal income tax returns that you would file in 2027, you can deduct only 90% of your gambling losses to offset your reported winnings. This provision, enacted in the “One Big Beautiful Bill,” has its detractors in Congress on both sides of the aisle, and the gambling industry is lobbying hard to end it. Don’t be surprised if it’s repealed either this year or next.
Disputes
If you disagree with an IRS audit determination, think about appealing. The Service’s Independent Office of Appeals falls within IRS, but is separate from the examination and collection divisions. As a general rule, taxpayers can request a conference with Appeals by submitting a written protest or statement setting forth the various issues in dispute and the reasons for disagreement.
Appeals has the authority to lower the tax owed in order to settle the dispute. The office weighs the possible outcomes if the case were to end up in court and can offer a settlement. Not all disputes merit a compromise, but many do.
Appeals is slowly taking steps to be more transparent with taxpayers and tax pros who represent clients. Appeals officers will now provide them with a copy of the appeals case memorandum (ACM) at the case’s end, upon an informal request, according to IRS’s National Taxpayer Advocate. The ACM is the written analysis prepared by the appeals officer detailing the facts, legal conclusion and rationale behind his or her proposed resolution of the case, for review by the appeals manager.