Tax Breaks: The No Covid-Era IRS Penalty Relief Answers (Yet) Edition

A caller U.S. Tax Court bid successful Bowen v. Commissioner had taxation professionals talking this week. Some taxation pros position it arsenic a setback for taxpayers seeking COVID-era punishment and liking relief. But I deliberation that’s an overstatement—the bid is narrower than immoderate early reactions suggest.

The taxpayers relied chiefly connected 2 erstwhile cases—Abdo v. Commissioner, successful which the Tax Court held that the COVID-19 disaster alleviation provisions automatically extended definite filing deadlines, and Kwong v. United States, successful which the Court of Federal Claims concluded that the pandemic postponement play ran done July 10, 2023, perchance supporting claims for refunds of liking and immoderate penalties.

In Bowen, the tribunal did not determine whether the pandemic disaster play extended taxation deadlines. Instead, it held that moreover if those deadlines were extended, the hold would not destruct accuracy-related penalties, which are based connected underpayments alternatively than missed filing aliases costs deadlines. The bid besides didn’t see the taxpayers' situation to interest, not because the declare lacked merit, but because the Tax Court concluded it did not yet person jurisdiction to determine that rumor since the lawsuit is ongoing.

Still, Bowen offers penetration into really 1 Tax Court judge views the narration betwixt COVID-19 disaster alleviation and accuracy-related penalties, while leaving the broader questions open. Stay tuned (I’ve predicted a SCOTUS reappraisal connected this full family of cases and guidelines by that).

Another rumor drafting attraction this week was access to Social Security section offices. A group of Democratic senators is demanding answers from Social Security Commissioner Frank Bisignano aft reports that immoderate Social Security section offices stopped offering in-person services. In a missive this week, the senators questioned whether those reported closures conflict pinch Bisignano's promise to support each section agency open. While galore regular transactions tin beryllium completed online, much analyzable matters—such arsenic subsister benefits, immoderate disablement claims, and appeals—often require speaking pinch an agency employee, making entree to section offices important.

The enquiry comes while Bisignano besides oversees day-to-day operations astatine the IRS arsenic the “CEO”, raising questions astir customer work astatine 2 of the national government's largest public-facing agencies. The senators constituent to staffing shortages and worker reassignments arsenic contributing to work disruptions, while the Social Security Administration disputes that characterization. The agency sent a connection to Forbes stating that “None of SSA’s section offices are closed aliases offering constricted work owed to staffing issues.” Any impermanent closures aliases work limitations, the agency says, are owed to renovations, maintenance, aliases different facilities-related problems alternatively than workforce shortages.

Outside of the taxation world, 1 of the biggest stories focused connected FIFA’s scheme to waste a liking successful a caller institution that would power the commercialized operations of the World Cup and different awesome competitions. The move has triggered fierce guidance from UEFA, which governs shot successful Europe, and CONCACAF, which governs shot successful North America, Central America, and the Caribbean.

Under the proposal, the caller company, FIFA Forward Enterprise, would negociate broadcast, sponsorship, licensing, hospitality, and ticketing rights, and extracurricular investors led by Thrive Capital (founded by Josh Kushner) would person a stock of early returns. FIFA says the woody could make important caller funding, but critics reason that introducing backstage investors could displacement the statement distant from its ngo to beforehand the world improvement of soccer.

The connection besides raises tax and governance questions. FIFA is organized arsenic a nonprofit relation nether Swiss law, and its commercialized occurrence has historically been justified arsenic supporting its broader mission. Selling a liking to investors seeking a financial return would not automatically jeopardize that status, but the last structure, investor rights, and usage of profits could impact really taxation authorities, including the IRS, position FIFA and related organizations. It could besides complicate early demands for the taxation concessions that countries person traditionally granted to FIFA and its partners erstwhile hosting the World Cup.

In much individual news, I’m looking guardant to having 2 of my 3 kids present for the weekend. My boy has been splitting clip betwixt his assemblage flat and location (we person amended food), while my youngest girl has been studying successful Paris (les baguettes vont lui manquer). They’re some headed home, which intends we’ll person a afloat house—including my mom and my mother-in-law—for Waffle Sunday (if you’re a portion of Tax Twitter, you cognize this already).

My oldest remains successful Berlin. Germany did not make Forbes’ database of The Best Places To Retire Abroad In 2026, but France and Spain did (my boy studied successful Spain past twelvemonth and has been plotting a return). Overall, 24 countries made the list, pinch 96 recommended spots, based connected amenities, costs, wellness care, ambiance consequence and whether U.S. retirees are welcome. You tin cheque it retired here.

If you’re still not definite whether—and where—to make the jump, you tin find retired really six Americans picked their status spots here.

And pinch that, I'm disconnected to dream of waffle batter. Until adjacent time, whitethorn your deadlines beryllium reasonable, your QR codes lead wherever they're expected to, and each of your authorities agencies reply the phone.

Enjoy your weekend,

Kelly Phillips Erb (Senior Writer, Tax)

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Questions

This week, a payer asked:

Thanks for your communicative astir claiming a genitor arsenic a dependent. I person a follow-up question. If I declare my mom who lives pinch maine and she sells her home, would she suffer the exemption for the waste of her home?

You’re reasoning of the conception 121 location waste exclusion, which allows taxpayers to exclude up to $250,000 successful summation connected the waste of a location ($500,000 for joined taxpayers filing jointly), assuming that they meet the criteria.

Your mom would not suffer the removal simply because you declare her arsenic a dependent. The dependency rules and the location waste removal are abstracted provisions of the taxation code, and being claimed connected personification else’s return does not, connected its own, disqualify a homeowner from excluding summation connected the waste of a main residence.

To suffice for the conception 121 exclusion, the homeowner mostly must fulfill some the ownership and usage tests. That intends that during the five-year play ending connected the day of sale, your mom must person owned the location for astatine slightest 2 years and utilized it arsenic her main residence for astatine slightest 2 years. Those 2 years do not person to beryllium continuous.

She whitethorn besides suffice for the $500,000 removal disposable to definite surviving spouses. If your mom had been joined and her hubby died successful 2025 aliases 2026, she tin declare the higher removal if the timing works. The waste must hap wrong 2 years of your mom’s husband’s decease and they must person satisfied the applicable ownership and usage requirements earlier his death. Additionally, she must not beryllium remarried earlier the sale. Otherwise, the accustomed $250,000 removal for an unmarried payer would apply.

The bigger rumor whitethorn beryllium whether the location waste affects your expertise to declare her arsenic a dependent. To suffice arsenic a limited nether the qualifying comparative rules, her gross income mostly must stay beneath the yearly period ($5,300 for 2026), and you must fulfill the different support and narration requirements.

Gain that is afloat excluded nether conception 121 mostly is not included successful gross income for purposes of the dependency income test. However, if the summation exceeds the removal magnitude (for example, presume her summation was $700,000 and she qualified for the $500,000 exclusion), the taxable information (in our example, $200,000, the magnitude complete the removal amount) would count toward her gross income. A large capable taxable summation could forestall you from claiming her arsenic a limited for that year.

So, being claimed arsenic a limited does not jeopardize your mom’s conception 121 exclusion. But the taxable information of the location waste gain, if any, could impact whether she remains eligible to beryllium claimed arsenic a dependent.

(Have a mobility to submit? Or a follow-up question? Email me.)

Statistics, Charts, and Graphs

Don't presume your unvested banal compensation disappears if you die. While galore equity awards are forfeited erstwhile an worker leaves a company, decease is often treated otherwise nether banal plans. In fact, galore employers let restricted banal units (RSUs) to proceed vesting aft an employee's death, and immoderate moreover accelerate vesting truthful that each remaining awards go afloat vested. The nonstop curen depends connected the position of the company's banal scheme and the individual assistance agreement.

As the floor plan shows, a mostly of companies surveyed by the National Association of Stock Plan Professionals proceed vesting for astatine slightest immoderate RSU grants aft death, pinch much than half accelerating vesting for each outstanding grants. Some dainty it arsenic discretionary.

Because these provisions tin importantly impact the worth passed connected to your heirs, it's worthy reviewing these agreements and discussing them pinch your taxation and property readying advisors.

Taxes From A To Z: C Is For Capital Gains

A superior summation is the profit you make erstwhile you waste a superior plus (if you suffer money, it’s a superior loss). Capital assets see things for illustration stocks, communal funds, existent estate, and even collectibles. For example, if you bargain 100 shares of banal for $5,000 and later waste them for $8,000, you've realized a $3,000 superior gain.

The taxation curen depends connected really agelong you owned the asset. If you held the banal for 1 twelvemonth aliases less, the summation is mostly short-term and taxed astatine your mean income taxation rate. If you held it for much than 1 year, it's usually a semipermanent superior gain, which qualifies for little taxation rates for astir taxpayers. Most taxpayers salary 15% for semipermanent gains. If you bump up into a higher bracket, you don’t salary the higher 20% complaint connected each your gains—you salary 20% connected the information complete the bracket period (the brackets are progressive, conscionable for illustration the national income tax). You tin find the brackets for those rates here.

(Since this is tax, exceptions apply, including those for art, collectibles, and conception 1250 summation related to depreciation.)

It’s easy to beryllium overwhelmed erstwhile looking astatine a sale. But support successful mind that your cheque successful manus doesn’t needfully correspond your taxable gain. Keep awesome records to thief you fig the quality betwixt the waste value and your adjusted basis.

Tax Trivia

Taxpayers of a definite property whitethorn person Social Security numbers that look akin to those of their peers, depending connected wherever they lived erstwhile their numbers were issued. That’s nary longer the case—your Social Security number is now random. When did that alteration happen?

(A) 1973

(B) 1987

(C) 1995

(D) 2011

Find the reply astatine the bottommost of this newsletter.

Positions And Guidance

The IRS has released the Applicable Federal Rates (AFRs) for August 2026. These rates alteration monthly and service arsenic the IRS's minimum liking rates for galore backstage loans and financing arrangements. If you're lending money to a family member, financing the waste of a location aliases business, aliases structuring an installment sale, the AFR whitethorn find the minimum liking complaint you should complaint to debar unintended taxation consequences. You tin find the rates successful the latest Internal Revenue Bulletin.

Noteworthy

The IRS observed National Whistleblower Day connected July 30. The time is intended to admit individuals who study wrongdoing and thief protect nationalist resources. Since the IRS Whistleblower Program began successful 2007, tips person helped retrieve much than $8 billion, pinch complete $1.4 cardinal paid successful awards.

The IRS and crypto level Coinbase are informing astir a convincing caller scam. Scammers are sending official-looking letters successful plain envelopes claiming that crypto holders must “enroll” successful a Digital Asset Compliance Portal, aliases DACP, earlier a deadline. The missive includes a QR codification that leads to a clone IRS website. This is simply a scam. The portal does not exist.

Key Figures

That’s the excise taxation rate that whitethorn use erstwhile you neglect to return your afloat required minimum distribution (RMD) from your status account. Due to a alteration successful the law, the punishment is now 25% of the magnitude that should person been withdrawn, down from 50%. And it tin beryllium reduced to 10% if you correct the correction wrong the applicable correction window, which mostly ends connected the earliest of the day a deficiency announcement is mailed, the day the taxation is assessed, aliases the past time of the 2nd taxation twelvemonth pursuing the twelvemonth of the missed distribution.

In immoderate cases, the punishment whitethorn beryllium waived wholly if you tin show reasonable cause, specified arsenic illness, a decease successful the family, aliases reliance connected incorrect master advice. To petition a waiver, record Form 5329 and explicate the circumstances.

Trivia Answer

The reply is (D).

Until June 24, 2011, Social Security numbers weren't wholly random. They followed a pattern:

• The first 3 digits (the "area number") mostly corresponded to the authorities wherever the SSN exertion was made—not needfully wherever the personification was born.
• The mediate 2 digits ("group number") followed a published shape that helped the SSA negociate number assignments.
• The past 4 digits ("serial number") were assigned consecutively wrong each group.

Because the numbers were somewhat predictable, group could often estimate wherever personification obtained their SSN and, successful immoderate cases, constrictive down erstwhile it was issued. To support numbers much private, the agency began randomizing numbers.

A nosy mathematics note: If each digit could beryllium thing from 0 to 9, location would beryllium 1,000,000,000 imaginable combinations, ranging from 000-00-0000 to 999-99-9999. But the SSA doesn't usage each combinations.. Taking immoderate of those restrictions into account, the theoretical maximum number of valid Social Security numbers is 888,931,098. Today, SSA says location are astir 420 cardinal numbers still available.

Worth A Second Look

The links, clips, and taxation takes readers loved (and a fewer you whitethorn person missed):

• New Trump Account Gift Tax Rules Ease Domestic Burdens, Complicate Foreign Ones
• As I’ve Seen, Caring For Kids And Aging Parents Costs More Than Money

You tin find past week’s newsletter here.

Tax Filing Deadlines

📅 September 15, 2026. Due day for your 2026 Q3 estimated taxation payment.

📅 October 15, 2026. Due day for individual taxpayers filing connected hold (payment was still owed April 15).

Tax Conferences And Events

📅 August 4-6. IRS Nationwide Tax Forum. New Orleans, Louisiana.

📅 August 25-27. International Association of Financial Crimes Investigators (IAFCI) International Training Conference. Nashville, Tennessee.

Feedback

We’d emotion your thoughts. What’s helpful? What’s confusing? What taxation topics do you want much of? Email maine directly—I publication each message.

If you person a taxation question, convention aliases extremity for me, check retired our guidelines and taxable it here.