The IRS Office of Professional Responsibility plans to release guidance in the first quarter of 2015 for practitioners working with marijuana retailers in states where the business is legal. The practitioners are pushing for the IRS to issue guidance clarifying that a tax professional will not be considered unethical, targeted for audit or be considered in violation of Circular 230 rules solely for preparing a return for a marijuana business. Although some states now allow the sale of marijuana, those sales are still illegal under federal law. Because the sale of marijuana is an illegal activity under federal law, the cost of goods sold will be an issue as drug dealers are never allowed to claim a cost of goods sold. In addition, there are related issues such as deductions dependent on whether the sale of marijuana is a trade or business of cultivating or sale, or whether it's a subsidiary trade or business that just happens to have a connection. Indeed, if the IRS does not allow COGS or Section 162 deductions, the tax bills could be a major hurdle.