Small Business Taxes &
ManagementTM--Copyright
2026, A/N Group, Inc.
For the full text of new Revenue Rulings, Revenue Procedures,
Regulations, etc. go to:
Internal
Revenue Bulletins
For a Tax Court Case:
Tax
Court Cases
For IRS News Releases (current month):
News
Releases and Fact Sheets
For Fact Sheets:
Fact
Sheets
For Letter Rulings and Technical Advice
Memoranda:
IRS
Written Determinations
For IRS Forms and
Publications:
Forms
and Publications
July 17, 2026
News
The IRS has issued final regulations (T.D. 10052) providing guidance on the application of the transfer for valuable consideration rules and associated information reporting requirements for reportable policy sales of interests in life insurance contracts to exchanges of life insurance contracts qualifying for nonrecognition of gain or loss and certain acquisitions of interests in life insurance contracts in transactions that qualify as corporate reorganizations. The final regulations affect parties involved in these life insurance contract transactions, including with respect to payments of reportable death benefits. The final regulations follow the proposed regulations with minor changes.
Tip of the Day
IRS issues AI guidance . . . Artificial intelligence can be helpful but it can also be detrimental if you aren't careful. The IRS has issued Introductory Guidelines for Responsible AI Use in Federal Tax Practice for tax practitioners. The webpage warns about the dangers of generative AI (GAI) and the requirement to review any documents created with GAI and has a general discussion of the use of AI in tax practice.
July 16, 2026
News
The IRS has announced (MI-2026-02) tax relief for individuals and businesses in the State of Michigan affected by severe storms, tornadoes, and flooding that began on April 10, 2026. These taxpayers now have until Nov. 2, 2026, to file various federal individual and business tax returns and make tax payments. Following the disaster declaration issued by the FEMA, individuals and households that reside or have a business in Alcona, Allegan, Alpena, Antrim, Barry, Benzie, Charlevoix, Cheboygan, Crawford, Eaton, Emmet, Grand Traverse, Gratiot, Iosco, Iron, Kalamazoo, Kalkaska, Lake, Manistee, Marquette, Mecosta, Menominee, Missaukee, Montcalm, Montmorency, Muskegon, Newaygo, Oceana, Ogemaw, Osceola, Oscoda, Presque Isle, Roscommon, Saginaw, Tuscola, Washtenaw, and Wexford counties qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after April 10, 2026, and before Nov. 2, 2026, are granted additional time to file. As a result, affected individuals and businesses will have until Nov. 2, 2026, to file returns and pay any taxes that were originally due during this period.Tip of the Day
Check your medical bill . . . You should either get a bill directly from your provider or an explanation of benefits from Medicare or your insurance company. Two reasons for checking the statement. One, you may be billed for a procedure you did not have or service you didn't receive. Or, two, someone may have stolen your "medical" identity and is incurring charges on your insurance. While this may not be costing you money directly, it's costing the system and, indirectly, all consumers.
July 15, 2026
News
The IRS has announced (MS-2026-02) tax relief for individuals and businesses in the State of Mississippi affected by severe storms, straight-line winds, tornadoes, and flooding that began on May 6, 2026. These taxpayers now have until Nov. 2, 2026, to file various federal individual and business tax returns and make tax payments. Following the disaster declaration issued by the FEMA, individuals and households that reside or have a business in Franklin, Lamar, Lawrence, Lincoln, and Wilkinson counties qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after May 6, 2026, and before Nov. 2, 2026, are granted additional time to file. As a result, affected individuals and businesses will have until Nov. 2, 2026, to file returns and pay any taxes that were originally due during this period. The Nov. 2, 2026, deadline applies to individuals who had a valid extension to file their 2025 individual income tax return. Because tax payments related to these 2025 returns were due on April 15, 2026, those payments are not eligible for this relief. Penalties on payroll and excise tax deposits due on or after May 6, 2026, and before May 21, 2026, will be abated as long as the tax deposits are made by May 21, 2026. The Nov 2, 2026, deadline also applies to affected quarterly payroll and certain excise tax returns normally due on July 31, 2026.
Tip of the Day
Planning for a startup . . . Except for a disaster such as a fire, tornado, etc., the most critical time of any business is the startup. Thats true for an entirely new business as well as opening a new location for an existing one. Jump in too early and you'll waste critical capital; too late and you'll have missed revenue and profits. Experienced franchisors have the details laid out in part because they plan, but also because they've learned from experience. Most startups can't rely on experience. You don't want shelving to arrive before the building construction work is done, but you don't want to have to wait for the shelving. Staffing can be even more critical. One small startup that showed great promise hired a salesman before the product was ready for production--way before. The salesman did some missionary work but basically sat around for nine months, at a hefty salary. You won't hit every milestone correctly, but a good plan will make things run smoother and help you recover when things don't go according to plan.
July 14, 2026
News
The IRS has announced (WI-2026-02) tax relief for individuals and businesses in the State of Wisconsin affected by severe storms, tornadoes, and flooding that began on April 13, 2026. These taxpayers now have until Nov. 2, 2026, to file various federal individual and business tax returns and make tax payments. Following the disaster declaration issued by the FEMA, individuals and households that reside in Bayfield, Brown, Buffalo, Iowa, Jackson, Jefferson, Juneau, Kenosha, Kewaunee, Manitowoc, Marathon, Milwaukee, Outagamie, Racine, Rock, Sauk, Vernon, Washington, Waukesha, Waupaca, and Winnebago counties, as well as the Oneida Indian Reservation qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after April 13, 2026, and before Nov. 2, 2026, are granted additional time to file. As a result, affected individuals and businesses will have until Nov. 2, 2026, to file returns and pay any taxes that were originally due during this period. The Nov. 2, 2026, deadline applies to affected taxpayers who normally would have been required to file their 2025 individual income tax returns and pay any tax due on April 15, 2026. It also applies to taxpayers who had a valid extension to file their 2025 return. Click on the link above for more information.
Tip of the Day
Standard mileage or actual costs? . . . Which one gives your the most benefit. If you've got an inexpensive car that gets good gas mileage and little maintenance worries and don't put high mileage on the vehicle, the standard mileage may be as good if not better than the actual cost. You'll also avoid keeping cost records and extra work on the return. If you've got an expensive vehicle and especially one that has high maintenance costs the actual cost method is better. But you've got to work through the numbers to be sure. Keep in mind that either way you'll have to keep a detailed log of your trips.
July 13, 2026
News
The IRS has issued final regulations (T.D. 10050) that amend the Federal estate tax regulations applicable to estates of decedents passing property to or for the benefit of a noncitizen spouse in a domestic trust that satisfies all of the requirements under applicable Federal tax law and regulations to be a qualified domestic trust and for which the executor of the decedent's estate has made a qualified domestic trust election. These final regulations modify the existing regulations to update outdated references, information, and procedures. These final regulations primarily affect the estates of decedents passing property to or for the benefit of a noncitizen spouse in a qualified domestic trust pursuant to applicable Federal tax law.
Tip of the Day
Picking third-party payroll service . . . Doing your own payroll rarely makes sense. The possible exception is for small, infrequent payrolls such as a two-man operation where you and your partner get paid monthly. In most other situations payroll is time consuming and a mistake can quickly result in substantial penalties. And there's always a chance for embezzlement because of the money involved. When picking an outside firm make sure they've got a good track record and are substantial in size.
July 10, 2026
News
The IRS has issued final regulations (T.D. 10051) identifying certain arrangements purporting to be Charitable Remainder Annuity Trusts as listed transactions. Material advisors and certain participants in these listed transactions are required to file disclosures with the IRS and are subject to penalties for failure to disclose. The final regulations describe a transaction in which taxpayers purport to eliminate ordinary income and/or capital gain on the sale of property. In abusive transactions of this type,
These final regulations follow the previously proposed regulations identifying certain CRAT transactions and substantially similar transactions as "listed transactions" for tax reporting purposes.
Tip of the Day
Corroborating evidence . . . An IRS agent or the court may just look at your car log, basis calculation, etc. and accept it. But don't count on it. The courts in particular may see by your car log you crossed the George Washington bridge on May 1, but your EZ-Pass tag shows no trips across the Hudson River for 30 days either side of that date. Or the hotel receipts don't match with your plane trip. At some point such errors could taint your entire log. The same applies to other documentation. Use care when recording dates, times, places, people met, etc.
July 9, 2026
News
The IRS announced IR-2026-83) a new automatic process to provide penalty relief for taxpayers with a history of filing and paying on time, reducing the need for them to request assistance. The new Automatic Exemption from Penalty (AEP) will replace the long-standing First Time Abate administrative relief and is designed to simplify the process and reduce burden for those with a timely compliance history. The new policy, is a systemic administrative relief program expected to begin this summer. AEP applies to eligible original returns beginning with tax year 2025 and 2026 quarterly returns, as well as future tax periods. Taxpayers qualify if they have a history of timely filing the return and paying any tax due in the three prior years (or 12 consecutive quarters for quarterly returns). When taxpayers qualify, penalties are not assessed during processing for:Taxpayers do not need to take action to receive this relief. If eligible, the IRS will apply AEP and issue a notice confirming that the relief was granted. Not all returns are eligible for AEP. For example, information returns and returns that are filed only in response to specific transactions or infrequent events (such as Form 706, U.S. Estate Tax Return or Form 709 Gift Tax Return) generally are not eligible. Taxpayers who do not qualify for AEP may still request penalty relief based on reasonable cause. Go to Penalty Relief for Reasonable Cause for information on other relief.
Tip of the Day
Hiring for the summer? . . . Some companies have just one employee--the owner. Or the owner operates as a sole proprietorship and has no employees. In that case no employment tax returns are filed. But if you hire someone for the summer you need to withhold income and social security taxes. In that case you'll need a employer identification number (if you don't have one), make deposits of the withheld taxes using the IRS EFTPS system, and file Form 941 and, at the end of the year, a W-2 for any employee. Get IRS Publication 15, Employer's Tax Guide for more information.
July 8, 2026
News
Distributions from a C (regular) corporation are income to not only shareholders, but they're also income to anyone. In Mark Chernomordikov; Jessica M. Chernomordikov a.k.a. Jessica Steiner (T.C. Memo. 2025-129) the taxpayer was not a shareholder in the corporation, but his mother was the sole shareholder. The taxpayer treated the corporation's funds as his own paying for luxury vehicles and other personal items as well as taking cash. He lent $1.7 million to a friend for his business without a written loan agreement. The taxpayer did not take a salary from the corporation and did not file individual income tax returns. The Court held that the taxpayer had income from the distributions and payment of personal expenses by the corporation, but that despite the IRS allegations for fraud, it had not carried its burden of showing fraudulent intent.
Tip of the Day
SBA help . . . It's not only when you need a business loan for expansion or when the the president declares a disaster. More minor disasters can qualify for loans or other help from the SBA. And don't ignore your state agencies. There's a good chance there's help available there too.
July 7, 2026
News
Rental real estate losses are passive and generally can not offset other income on an individual's tax return. But, as always there are exceptions. One is if the taxpayer is a "real estate professional" and spends 750 hours or more during the year on real estate activities and if the rental is short-term. In Kevin J. Mirch and Marie C. Mirch (T.C. Memo. 2025-128) the taxpayers had two rental properties. One was rented on a long-term basis; the other was a short-term rental, rented on a daily basis. The participation requirement for the short-term rental property is much less, it could be as little as 100 hours, but the Court found that it was not met. The Court questioned the method used to arrive at the determining the hours spent on the activity and the recordkeeping used. With respect to the longer-term rental property, the Court found the 750-hour requirement had not been met by the taxpayer's own logs.
July 6, 2026
News
You might be able to get an award from the IRS for providing information on another taxpayer that results in the IRS getting money, but the process is not without requirements. In John R.Dee (167 T.C. No. 1) the petitioner provided information to the IRS regarding a taxpayer. The IRS's Whistleblower Office (WBO) forwarded the petitioner's information to the examination team that had recently finished working on a pre-existing audit regarding a taxpayer. The examination team told the WBO that it had already identified and acted on the issues identified by the petitioner. The WBO denied the petitioner's claim for an award under Sec. 7623(b). The Court held it had jurisdiction over whistleblower cases when the whistleblower's information is received by an examination team regarding an open examination as defined by Rev. Proc. 2005-32 and that the petitioner had not shown that the administrative record requires completion or supplementation and that the WBO's determination to deny the petitioner's claim for an award was not an abuse of discretion.
July 1, 2026
News
Cost of goods sold is not deduction but rather a subtraction from gross receipts in determinging a taxpayer's gross income for manufacturing, mining or merchandising businesses. Business expenses such as marketing constitute a deduction. In the case of a service business, gross receipts constitute gross income without any reduction for cost of goods sold. In Andre Temnorod and Brianna Temnorod, et al. (T.C. Memo. 2025-127) a telecommunications company (doing business as an S corporation) purchased the assets of another company in banruptcy proceedings by assuming certain unsecured liabilities payable to vendors of the bankrupt entity. The taxpayer deducted the cost of the assets purchased as cost of goods sold. The IRS argued that the amount paid must be capitalized, not deducted. The Court sided with the IRS, noting expenditures that a buyer must capitalize into an acquired asset's basis are not limited to the price paid to the seller but also include, for example, legal, brokerage, accounting, appraisal, and other ancillary expenses directly related to the asset's acquisition. The requirement that costs be capitalized extends beyond the price payable to the seller to include any costs incurred by the buyer in connection with the purchase, such as appraisals of the property or the costs of meeting any conditions of the sale. They also include liabilities assumed.
Tip of the Day
Balance sheet cleanup . . . It's not unusual for assets to remain on the books long after they're gone. They may not have any impact on your financials or taxes, but they can pose an issue. Those 10-year old power tools have been lying in the corner for years--or even thrown out. They're fully depreciated so there's no tax effect, except possibly for property tax purposes. But once a fully depreciated asset is no longer in your possession they should be taken off the books. You should do a check at least every year when preparing the tax return. You should also check for assets that were sold (or traded in) or abandoned. Assets that were sold may have produced a gain or depreciation recapture or a loss. Assets abandoned could have resulted in a loss. Gains and depreciation recapture could produce taxable income or a deductible loss. Abandoned assets could result in a loss.
June 30, 2026
News
Revenue Procedure 2026-25 provides a gift tax reporting safe harbor for certain contributions to Trump accounts created under the Working Families Tax Cuts. Under this safe harbor, if certain requirements are met, contributions made by individual donors to Trump accounts in a given year will not be subject to gift tax reporting requirements for that year. The safe harbor only applies to cash contributions (cash, check, electronic funds transfer) all made before beneficiary attains the age of 18, total contributions, including contributions to that beneficiary's Trump account don't exceed the annual exclusion ($19,000 for 2026), and such contributions to Trump accounts made during the calendar year do not generate for that calendar year either a gift or GST tax liability, after application of the taxpayer's remaining applicable credit amount4 against the gift tax, or remaining GST exemption.
Tip of the Day
S corporation losses . . . Just because you have a shareholder in an S corporation doesn't mean you can automatically take any losses on your personal return. First, you have to have sufficient basis--either equity or debt--and you must be "at-risk" with respect to that amount. Second you must materially participate in the activity. You can meet this requirement in several different ways, but generally you must participate in the day-to-day management of the business. If you don't meet all the tests those losses are suspended until you have offsetting income, materially participate or you dispose of all of your interest in the stock. If you switch from S to C corporation status, the losses are suspended until the entity is once again an S corporation. Check with your tax advisor before making any switch.
June 29, 2026
News
Each type of entity--C corporation, S Corporation, partnership, sole proprietorship, etc.--have advantages and disadvantages. One of the disadvantages of a regular corporation is the possibility of constructive dividends. A constructive dividend occurs when the corporation makes a payment to a shareholder that is not a reimbursement of business expense or salary. For example, when the corporation makes the lease payment on the personal vehicle of a shareholder. The dividend is not deductible by the corporation but is income to the shareholder. In David S. Alioto (T.C. Memo. 2025-125) the Court held the taxpayer had constructive dividends because the corporation paid personal expenses of the taxpayer without repayment expectation. In this case the income was taxed as a capital gain since the taxpayer-shareholder had no basis in the corporation. A promissory note did not have the characteristics of bona fide debt. The taxpayer tried to claim that amounts received were not wages but a repayment of funds lent the corporation. The Court held that he could not do so, noting the duty of consistency prevents a taxpayer from benefiting in a later year from an error or omission in an earlier year which cannot be corrected because the time to assess tax for the earlier year has expired.
Tip of the Day
Executor's duty . . . An executor can be personally responsible for the estate's debts unless he or she is very careful. Make sure the debts are paid before distributing the assets. And, if there isn't enough to cover all the debts, the IRS has priority. Both the decedent's federal income tax liabilities at the time of death and the estate's income tax liability are debts due the United States. The personal representative of an insolvent estate is personally responsible for any tax liability of the decedent or of the estate if he or she had notice of such tax obligations or had failed to exercise due care in determining if such obligations existed before distribution of the estate's assets and before being discharged from duties.
June 26, 2026
News
The National Taxpayer Advocate Erin M. Collins released her Fiscal Year 2027 Objectives Report to Congress, highlighting a largely successful 2026 filing season in which the IRS processed nearly 139 million individual tax returns, issued more than 90 million refunds, and successfully implemented extensive tax law changes despite significant operational challenges. The report also identifies areas where taxpayers experienced refund delays and service challenges, including returns suspended during processing for additional review, delays in receiving paper refund checks, and prolonged case resolution times for victims of identity theft, while outlining the Advocate's priority recommendations as the IRS continues to modernize its technology systems. The report credits the IRS's continued technology transformation efforts as a primary driver of its success. By the end of the filing season, the IRS had processed about 139 million Forms 1040 (U.S. Individual Income Tax Return), and about 98% had been submitted electronically. About 65% of those returns resulted in refunds, and about 98% of refunds were delivered by direct deposit. As a result, the significant majority of returns were processed via automation and without issue, allowing most taxpayers to file their returns and receive their refunds without delay. However, more than 14 million individual income tax returns were suspended during processing. More than one million taxpayers did not receive their refunds within the IRS's normal processing time, experiencing an average wait of about 5-1/2 weeks. A significant but unknown number of taxpayers experienced shorter refund delays that fell within normal processing times. Taxpayers had more difficulty reaching the IRS by phone during the 2026 filing season than during the 2025 filing season. Overall, the IRS received 48.1 million calls, telephone assistors answered 9.9 million calls (21%), and the average time taxpayers spent waiting on hold was 14 minutes, as compared with 50.2 million calls received, 12.4 million calls answered by telephone assistors (25%), and an average wait time of 8 minutes during the prior filing season. Click on the link above to read the full report.
Tip of the Day
De minimis expensing safe harbor . . . Generally assets with a life of more than one year must be depreciated. But under a de minimis rule you can expense tangible personal property of no more than $2,500 ($5,000 with an applicable financial statement) but only if you use the same per-item limit for financial or book purposes. That relieves you of having to account for small assets. You must make an election every year on a timely filed tax return and have accounting procedures that use the same method for non-tax purposes. (This is different than electing to expense an asset under Section 179.)
June 25, 2026
News
You may have options in paying off your tax liability, but these options aren't automatic. In Timothy L. Fisher and Roseann Fisher (T.C. Memo. 2025-124) the taxpayer had an outstanding debt exceeding $200,000 including interest and penalties and requested an installment agreement. The taxpayers provided financial information and the revenue officer (RO) computed the taxpayers disposable monthly income of some $14,000 based on allowable expenses and that their home was valued at some $2.5 million and had a net equity after mortgage debt of $1.674 million. The RO recommended that an installment agreement be denied because the taxpayers had the ability to pay from their assets. An appeals officer (AO) explained that asset equity must be considered and informed the taxpayers that they must explore the possibility of liquidating or borrowing against their assets unless it posed an economic hardship as defined in Internal Revenue Manual (IRM). The taxpayers were given four four weeks to respond if they disagreed and to provide the basis for their disagreement. They never responded. The Tax Court has generally held that there is no abuse of discretion when an AO relies on guidelines published in the IRM to evaluate a proposed installment agreement. The Tax Court has also routinely held that an AO does not abuse his discretion when he rejects an installment agreement because a taxpayer refuses to liquidate assets to satisfy his tax liabilities. The Court found no abuse by the IRS and affirmed the Appeals' determination to sustain the filing of the NFTL and the proposed levy.
Tip of the Day
Foreclosure disaster . . . Fall behind on property taxes? Homeowner's association fees? Or some other debt (including a home mortgage) secured by your home? The remedy for the creditor may be to foreclose on the property and sell it at auction. That's what happened to one homeowner in a U.S. Supreme Court case. The home was valued at some $200,000 but was sold at auction for $76,008 to pay a $2,242 tax bill. The Court held that the homeowners were only entitled to $73,766, the difference between the $76,008 the house sold for and the outstanding tax bill, not the lost equity. The decision by the Court was unanimous citing a long history law. Don't wait till it's too late to act on delinquent taxes and make sure your elderly relatives are current on their debts.
June 24, 2026
News
The IRS announced (IR-2026-78) select Taxpayer Assistance Centers will be open Saturday, June 27, for the final Saturday service event of 2026. Participating TACs will be open from 9 a.m. to 4 p.m. to provide in-person assistance on a range of tax-related issues. Taxpayers are encouraged to visit IRS.gov/saturdayhours before going to an office to confirm participating locations, available services, and appointment times. During this one-day event, participating TACs in multiple states, the District of Columbia, and Puerto Rico will offer many of their regular services. Cash payments will not be accepted. Appointments fill quickly, so taxpayers are encouraged to make an appointment at their local TAC as soon as possible.
Tip of the Day
Returns for deceased . . . In addition to an estate tax return reporting the value of the deceased's estate, an executor will have to file the decedant's last income tax return and possibly an estate (trust) return for income earned by the decedant's estate before all the income producing assets have been distributed. Should additional tax be assessed and all the assets distributed, the executor is responsible for any tax owed. The executor can shorten the usual 3-year statute of limitations by filing a request for prompt assessment of tax. This will reduce the time for making an assessment to 18 months from the date of the request.
June 23, 2026
News
The IRS announced (AZ-2026-01) tax relief for individuals and businesses in the San Carlos Apache Tribe affected by severe storms and flooding that occurred between Oct. 10, 2025 to Oct. 13, 2025. These taxpayers now have until Sept. 28, 2026, to file various federal individual and business tax returns and make tax payments. Following the disaster declaration issued by FEMA, individuals and households that reside or have a business in the designated area qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, for certain deadlines falling on or after Oct. 10, 2025, and on or before Sept. 28, 2026, taxpayers are granted additional time to file. As a result, affected individuals and businesses will have until Sept. 28, 2026, to file returns and pay any taxes that were originally due during this period. The Sept. 28, 2026, deadline applies to individual income tax returns and payments normally due on or after Oct. 10, 2025. Penalties on payroll and excise tax deposits due on or after Oct. 10, 2025, and before Oct. 27, 2025, will be abated as long as the tax deposits are made by Oct. 27, 2025.
Tip of the Day
Borrow money on your stocks? . . . It can be a risky maneuver if you're not careful. However, borrowing on existing holdings can make sense if your business needs cash for short-term purposes, you need a bridge loan on a new home, etc. It makes more sense if you're sitting on a big gain and cashing in would result in a substantial tax bite. But keep in mind that if you can't make the payments on the loan or your portfolio declines below a certain point, those stocks could be sold to cover the debt. And you could find yourself in a bad tax position where you have no options. Explore other options before committing and talk to your accountant and financial advisor before proceeding.
June 22, 2026
News
Notice 2026-40 announces that the IRS intends to issue proposed regulations regarding qualified opportunity zones (QOZs) under Secs. 1400Z-1 and 1400Z-2 of the Code, as amended by Public Law 119-21, commonly known as the One, Big, Beautiful Bill Act (OBBBA), including transitional guidance related to qualifying investments under Secs. 1400Z-1 and 1400Z-2. Section 1400Z-2 allows the deferral of inclusion in gross income for certain realized gains to the extent that corresponding amounts are timely invested in a corporation or partnership that meets the requirements to be certified as a qualified opportunity fund (QOF), as defined in Sec. 1400Z-2(d)(1) and Sec. 1.1400Z2(d)-1. If certain qualifications and holding period requirements are met, then (i) a portion of such deferred gains may be excluded from gross income, and (ii) gain on the taxpayer's investment of such amounts in a QOF may be excludable from gross income.
Tip of the Day
Where are interest rates headed? . . . Not down. The Fed doesn't look inclined to reduce rates at this time. Of course that could change at any time if the economy heads down, but it looks like inflation is going to hang around and that's still the biggest concern for the Fed. You should also keep in mind that rates are governed by more than the Fed, but those too are trending higher. If you were waiting for a drop to take out a mortgage or borrow for business, you might have to wait a while for a real drop.
June 18, 2026
News
Notice 2026-35 (IRB 2026-25) announces the applicable perecntage under Sec. 613A to be used in determining percentage depletion for marginal properties for calendar year 2026. For 2026 the applicable percentage is 15%, unchanged from 2025.
Tip of the Day
Investment commissions . . . Many brokerage houses now charge very little to buy or sell stocks. But the same is may not be true for other investments. Commissions on mutual funds can vary widely, annuities can have a declining fee structure making a sale in the first few years very expensive. More exotic investments can be even higher. Some investments may not have a commission but you may pay a premium over the market price going in and a discount from market when you're selling. There are other variations. Do your due deligence before investing.
June 17, 2026
News
The IRS announced (MT-2026-04) tax relief for individuals and businesses in the Crow Tribe of Montana in southcentral Montana and individuals and businesses in the Fort Peck Assiniboine and Sioux Tribes in northeastern Montana (MT-2026-03) affected by a severe winter storm and straight-line winds that occurred between Dec. 17, 2025, and Dec. 19, 2025. These taxpayers now have until Sept. 28, 2026, to file various federal individual and business tax returns and make tax payments. Following the disaster declaration issued by the Federal Emergency Management Agency (FEMA), individuals and households that reside or have a business in the Crow Reservation qualify for disaster tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, for certain deadlines falling on or after Dec. 17, 2025, and on or before Sept. 28, 2026, taxpayers are granted additional time to file.
June 16, 2026
News
The Treasury Inspector General for Tax Administration (TIGTA) has released a report assessing the quality and accuracy of telephone assistance provided to taxpayers on certain telephone lines. TIGTA reviewed 200 call recordings and found 52 (26%) where IRS representatives did not provide quality service. In some of these cases, the calls contained multiple issues. Seven callers did not receive courteous service, 14 received inaccurate information, 20 had long hold times and 22 calls were dropped, disconnected, or not transferred.
Tip of the Day
Short-term, long-term . . . The term of a loan, contract, lease, etc. can be just as important as the rate or amount. You don't want to lock in a dollar amount for delivery of goods for three years into the future if the price could drop without some sort of protection. Leases for rental property can be even more critical since the terms are often 5, 10 or even more years. The term can be difficult to evaluate because you're betting on events in the future, but taking the time to consider all the factors can help you avoid a potential disaster.
June 15, 2026
News
As part of the administration's efforts to reduce the size of the federal workforce, the IRS offered various separation programs. The Treasury Inspector General for Tax Administration (TIGTA) initiated a review to provide an update to its previous report on the status of the IRS's workforce. This report provides a snapshot of IRS business units and positions impacted, as of January 2026. TIGTA found that according to IRS records, 31,273 employees separated, took a DRP offer, or used some other incentive to leave the agency during the one-year period between January 2025 and January 2026. These departures represent approximately 30 percent of the IRS's workforce and impact certain business units more than others. The IRS began to backfill select positions. As of January 2026, approximately 2,000 employees have been hired. As a result, the net effect on IRS staffing was a decrease of 28 percent. Overall workforce reductions have impacted employees in certain IRS business units and positions (job series) more than others. For example, approximately 33 percent of revenue agents and approximately 32 percent of tax examiners separated from the IRS. Revenue agents conduct examinations (audits) by reviewing financial records of individuals and businesses to verify what is reported. To see the full report, go to www.tigta.gov/sites/default/files/reports/2026-06/2026ier009fr.pdf.Tip of the Day
Partnership ownership changes . . . Unlike an S or C corporation, tax law provides that a partnership terminates when 50% or more of its total capital and profits interest is sold or exchanged within a 12-month period. Such a technical termination occurs on the date of the sale or exchange of a partnership interest that crests the 50% threshold, when added with other sales or exchanges in the preceding 12 months. In the case of a technical termination, a new partnership is deemed formed and it must also file a separate partnership return for the remaining period of the partnership taxable year. That's something to keep in mind if you're operating as a partnership.
June 12, 2026
News
You may be able to secure a charitable contribution deduction for a conservation easement, but overvalue the amount of the contribution and you could find yourself in trouble. In Lake Jordan Holdings, LLC, Lake Jordan Partners, LLC, Tax Matters Partner (T.C. Memo. 2025-123) the partnership claimed a charitable contribution deduction of $12,740,000 on its 2017 tax return for the donation of a conservation easement over 157 acres of rural property in Elmore County, Alabama (easement property). The Court noted that outside the current environment, this value would be truly remarkable. A 96% stake in Holdings, whose only asset was 165 acres of land—the easement property and eight adjacent acres of odds and ends—had cost $583,000 a few months before. The Court described the property in some detail citing a number of negative factors. The Court held that the before contribution value of the property was some $1.4 million and the after value $285,000, the value of the consdervation easement was $1,091,760.
Tip of the Day
Monitor spending . . . There are two ways to get richer--(1) make more money or (2) save more money. Many people think they're saving money by shopping sales, getting free miles from business flying, or getting cash back on purchases. That may provide some savings, but it may also encourage extra spending. A better way to save is to think twice before making the purchase. Do you need the top-of-the-line coffee maker for $150 or will a $50 unit work just as well? Do you even need a new one? Review your credit card purchases or bank statement at the end of the month to see where your money is going. Better yet, list purchases on a spreadsheet. You might be surprised at where your money is going. The advice works for both your personal and business spending.
June 11, 2026
News
Notice 2026-39 provides information that taxpayers may use to determine whether they meet certain requirements under the Statistical Area Category or the Coal Closure Category as described in sections 3.03 and 3.04 of Notice 2023-29 for purposes of qualifying for energy community bonus credit amounts or rates under Sections 45, 45Y, 48, and 48E of the Code. This information is provided in Appendices 1, 2, and 3 of this notice. Appendix 1 of this notice addresses the Statistical Area Category, and Appendices 2 and 3 of this notice address the Coal Closure Category. This notice does not provide information addressing the Brownfield Category as described in section 3.02 of Notice 2023-29. None of the appendices provided for purposes of energy community bonus credit amounts or rates are applicable for purposes of qualifying for the advanced energy project credit determined under Sec. 48C.Effective June 28, the IRS is creating a new office to simplify and modernize how it interacts with the tax professional community. The Return Preparer Office (RPO) and the Office of Professional Responsibility (OPR) will align under the new Tax Professional Management Office. The merger will benefit tax professionals by creating improved efficiencies and simplified operations, making it easier to work with the Service. This reorganization will not change the distinction between credentialed tax professionals and uncredentialed tax preparers. The missions of RPO and OPR will remain intact. They will operate independently within their respective roles and authorities. Aside from improved efficiencies, the merger will have no impact on how IRS oversees the tax professional community.
Tip of the Day
Late election? . . . Generally you can only make an election such as a sale of assets on the installment method, opting out of bonus depreciation, etc. only on a timely filed return. But in some cases all my not be lost. In a letter ruling (LR 202623014) the taxpayer maintained the return preparer failed to inform him the installment method was available as an option. Keep in mind that this is a last ditch approach. The IRS can reject the argument and, even if you succeed applying for a letter ruling is not without cost.
June 10, 2026
News
If you're not engaged in a business with the intent of making a profit, any losses are not deductible. In Gary M. Schwarz and Marlee Schwarz (T.C. Memo. 2025-122) the taxpayers were engaged in a farming activity through a partnership. In a prior case the Tax Court ruled the activity was not for profit, citing Reg. Sec. 1.183-1(d)(1) and 1.183-2(b). The taxpayers in the first case did not challenge the validity of those regulations. Subsequently the Supreme Court ruled that if an agency's interpretation of the law "is not the best, it is not permissible". In this case the taxpayersallege that Reg. Secs. 1.183-1(d)(1) and 1.183-2(b) are invalid because they do not represent the best interpretation of Sec. 183. The taxpayers also allege that (1) the regulations violate the notice-and-comment requirements of the Administrative Procedure Act, and/or (2) Congress did not delegate authority to the Secretary of the Treasury to issue the regulations. The Tax Court agreed to consider the validity of the regulations and/or whether the validity of the regulations would affect the outcome of this case. The Court held it did not need to address the taxpayers' arguments regarding the validity of Reg. Sec. 1.183-1(d)(1) and 1.183-2(b). The portions of those regulations necessary to decide this case are largely based on caselaw existing at the time Sec. 183 and the regulations were adopted. Applying that preexisting caselaw (and some more recent caselaw) to the facts of this case, the Court said it would still hold that the partnership did not engage in the Schedule F farming activity with the intent to make a profit.
Tip of the Day
Keep looking . . . Wasn't that long ago that if you entered a good, specific search term a search engine would return a good answer as the first, second, or third response. Now those spots are almost assuredly taken by a paid ad for a product related to your search term. In fact, you often must look past the first five or 10 returns before you find a non-sponsored answer. In some situations you must look much further.
June 9, 2026
News
The IRS announced (IR-2026-76) that 27 states have elected to participate in the Federal Scholarship Tax Credit (FSTC) program, which enables eligible taxpayers to claim a federal tax credit for qualified contributions to Scholarship Granting Organizations (SGOs) providing scholarships for qualified elementary and secondary education expenses. For taxpayers to claim the tax credit of up to $1,700, they must contribute to an SGO located in a state that elects to participate in the FSTC program and submits a list of qualified SGOs. State participation in the program, enacted under the One, Big, Beautiful Bill, is voluntary. As of early 2026 multiple states have formally opted into the program, including: Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.
Tip of the Day
Free File . . . It's still available. Even though it's past the deadline Free File from the IRS is still available. Eligible taxpayers, especially those who do not normally file a tax return, may still qualify for overlooked tax credits or refunds. More than 109 million taxpayers are eligible for free guided tax preparation through IRS Free File. Those who do not qualify can still file electronically using Free File Fillable Forms. IRS Free File remains available through Oct. 15.
June 8, 2026
News
Notice 2026-36 announces that the IRS intends to issue proposed regulations under Section 4960 of the Code pertaining to the tax on excess tax-exempt organization executive compensation. It is anticipated that the proposed regulations will address the effective date of the amendment to the definition of covered employee made by section 70416 of the One, Big, Beautiful Bill Act (OBBBA) and will also propose exceptions to the definition of covered employee that are similar to the limited hours and nonexempt funds exceptions in the existing Section 4960 regulations. This notice also solicits public comments on the matters addressed in this notice.The IRS has issued the 2025 Data Book detailing the agency's activities during fiscal year 2025. The report provides a statistical overview of the agency’s operations and the work employees performed to meet statutory responsibilities. The book noted the exam coverage rate for TY 2021 (the most recent year outside the statute of limitations period) of individual taxpayers reporting total positive income (TPI) of $10 million or more was 6.6%. The rate for taxpayers with TPI of $5 million-$10 million was 3.9%, and 0.9% for those with TPI of $1 million-$5 million. The data book contains information on the IRS's enforcement activity, returns filed by type and state, etc.
Tip of the Day
Loan or gift? . . . If you make a true loan of money to your children, the amount has, except for and interest that may be forgiven, no tax consequences. If it's a gift, it could be subject to gift tax liability. In Estate of Mary P. Bolles, Deceased, John T. Bolles, Executor (T.C. Memo. 2020-71) the IRS contended that amounts transferred to the deceased's son were gifts rather than loans. The Court examined the pattern of gifts by the deceased to her five children. She kept a record of advances and repayments for each child and treated them as loans. She forgave the "debt" account of each child every year on the basis of the gift tax exemption amount. However, she advanced considerable funds to one of the children to assist his business. The Court held that the first few years the amounts were loans based on the deceased's expectation of repayment. Amounts advanced the son after that time were gifts because she no longer believed the business would be able to repay the amounts.
June 5, 2026
News
The IRS is cautioning that not all online tax advice is accurate. Scammers and misinformation are common on social media. That’s why it's important for taxpayers to follow official IRS social media accounts and subscribe to e-News updates, for the most reliable information. For more information go to IRS Tax Tip 2026-44.The IRS announced (IR-2026-68) new features in IRS Individual Accounts that allow taxpayers to view and submit Trump Account elections, making it easier to invest in these tax-advantaged accounts. Through IRS Individual Account, taxpayers can securely access their tax information and complete common tasks online, including:
A one-time $1,000 pilot program contribution from the Department of the Treasury is available for eligible children born between Jan. 1, 2025, and Dec. 31, 2028, who are U.S. citizens with a valid Social Security number.
Tip of the Day
It's free! . . . There's always some sort of strings Getting your heritage from your DNA was cheap because the provider sold information on your DNA. Irt might have been radomized, but it still had value. Your financail information information is highly valuable too. Think twice before giving up any personal information.
June 4, 2026
News
T.D. 10049 sets forth final rules related to certain provisions of the No Surprises Act regarding the Federal independent dispute resolution (IDR) process. These rules finalize new requirements relating to the disclosure of information that group health plans and health insurance issuers offering group or individual health insurance coverage must include along with the initial payment or notice of denial of payment for certain items and services subject to the surprise billing protections in the No Surprises Act. These final rules also require plans and issuers to communicate information by using claim adjustment reason codes (CARCs) and remittance advice remark codes (RARCs), as specified in guidance, when providing any paper or electronic remittance advice (ERA) to an entity that does not have a contractual relationship with the plan or issuer. This document also finalizes amendments to certain requirements related to the open negotiation period preceding the Federal IDR process, the initiation of the Federal IDR process, the Federal IDR dispute eligibility review process, and the payment and collection of administrative fees and certified IDR entity fees. This document also finalizes the definition of bundled payment arrangements, amends requirements related to batched items and services and amends the rules for extensions of timeframes due to extenuating circumstances. Additionally, this document finalizes provisions that require plans and issuers to register in the Federal IDR portal. In accordance with Federal law, a summary of these rules may be found at https://www.regulations.gov/.
Tip of the Day
Tax debt relief scheme . . . We've said you can be relieved of some or all of your tax debt, but it's not as easy as they make it sound on TV. The Federal Trade Commission has announced the operators of a tax debt relief scheme will surrender over $8 million in cash and turn over additional assets to settle the Federal Trade Commission and State of Nevada’s charges that the defendants pocketed millions from consumers by impersonating federal and state government tax authorities and promising tax debt relief. Under the proposed order, Terrance Selb and Tyler Bennett, operators of American Tax Service (ATS), will also be banned from debt relief services, tax preparation services, telemarketing and impersonation of individuals, governments or businesses. The FTC alleged they impersonated government agencies, including the Internal Revenue Service, deceptively promised tax debt relief, sent threats to consumers about their debts and pocketed tens of millions of consumers' dollars. ATS and its operators claimed they could settle taxpayers' back taxes for "pennies on the dollar" or for only a "fraction" of what taxpayers' owed, often making these claims before evaluating the taxpayer's circumstances, according to the FTC. The Commission presented evidence in court showing that the company’s operators targeted older consumers in upselling fictitious add-on services, often for tens of thousands of dollars at a time. The FTC claims some $77.7 million was taken from consumers.
June 3, 2026
News
The case of Tri-State Memorial Hospital (U.S. District Court, E.D. Washington) arose out of allegations that Tri-State was wrongfully denied a tax refund for the first, second, and third quarters of 2021 under the Employee Retention Credit ("ERC") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES act"). The case involved a Motion to Dismiss by the IRS. The ERC was created to provide a tax credit against applicable employment taxes for employers who paid qualified wages to their employees during the calendar quarters in 2020 and 2021. In order to qualify for the credit a business had to meet one of three requirements:(i)the operation of the trade or business described in clause (i) is fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the coronavirus disease 2019 (COVID-19), ("Suspension Test")
(ii) the gross receipts (within the meaning of Section 448(c)) of such employer for such calendar quarter are less than 80 percent of the gross receipts of such employer for the same calendar quarter in calendar year 2019, or ("Gross Receipts Test")
(iii) the employer is a recovery startup business.
The taxpayer showed that it partially suspended its business due to government orders that affected healthcare facilities to implement the restrictive infection prevention protocols. The IRS contended the taxpayer failed to state a claim because it did not provide facts it met the 10% threshold in IRS Notice 2020-21 but the Court noted this was administrative guidance and not stated in the statutory text. The Court declined to dismiss the case.
Tip of the Day
Right to audit . . . You hire an independent contractor for consulting work and agree to reimburse him for expenses including meals, lodging, equipment rentals, subcontractors, etc. If the contract is substantial, make sure you include a right to audit his expenses. Contractors have been known to pad charges that should be legitimately passed through without a markup. Similarly, if you're a tenant in a building you should also have the right to review building cost data if a share of the expenses are being passed through on your lease.
June 2, 2026
News
Revenue Procedure 2026-24 provides the 2027 inflation adjusted amounts for Health Savings Accounts (HSAs) as determined under Section 223 of the Code and the maximum amount that may be made newly available for excepted benefit health reimbursement arrangements (HRAs). For 2027 the definition of a high-deductible plan is one with a deduction of not less than $1,750 for self-only coverage or $3,500 for family coverage with annual out-of-pocket limits (for deductibles, copays, etc) of not more than $8,700 for self-only coverage and $17,400 for family cocerage.. The limit on deductions for self-coverage under a high-deductible plan is $4,500 ($9,000 for family coverage).
Tip of the Day
Amended state return? . . . States don't automatically follow federal tax law. Some do, but not always all provisions. And, in some cases, the federal changes have to be adopted by legislation. Keep that in mind when preparing your return. If you're amending your federal return, take a good look at your state return. It too many need to be amended.
June 1, 2026
News
The IRS has announced (IR-2026-70) the release of a new calculator to help businesses working on large, multi-year construction or manufacturing projects more easily figure interest related to those contracts. The Excel-based Percentage-of-Completion Method (PCM) Look-Back Interest Calculator supports calculations required for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. Tax professionals including certified public accountants, enrolled agents, and other tax preparers working with long-term construction and manufacturing contracts may find the calculator useful when computing look-back interest. Practitioners should review the calculator output carefully, consider each taxpayer's specific circumstances, and ensure compliance. The look-back interest is determined using a three-step process:
The calculator is designed to assist with the interest computation step by providing a structured framework to perform the computations. However, the IRS emphasizes that using the calculator does not guarantee compliance with the law and does not replace authoritative guidance, as the tool does not address all fact patterns or complexities associated with look-back interest calculations.
Tip of the Day
Borrowing from your parents? . . . Or another relative or friend? If one or both of you have businesses and this is a personal loan--for a car, boat, etc.--document the loan by writing up an agreement and transferring the money by a check or a transfer between bank accounts so you have a bank record of the withdrawal and deposit. That could be important if you're audited or one of you dies. You may need to charge interest because the lack of interest or too low a rate can be considered a gift. Talk to your tax adviser. If you're loaning money to a relative's business documentation will be even more important.
May 29, 2026
News
The IRS announced (IR-2026-68) new features in IRS Individual Accounts that allow taxpayers to view and submit Trump Account elections, making it easier to invest in these tax-advantaged accounts. Through IRS Individual Account, taxpayers can securely access their tax information and complete common tasks online, including:
These new features reflect the IRS's continued focus on transforming the Service into a digital-first agency that delivers a faster, more seamless experience for taxpayers and provides a new tax-advantaged investment account for children to save for college, retirement, and building generational wealth. Taxpayers benefit from greater transparency through real-time visibility into the Trump Account election process. Electronic submissions also improve accuracy, speed up processing times, and reduce delays associated with paper forms.
Tip of the Day
Contemporaneous records . . . The IRS and the courts give more value to diary entries, etc. made near the time of the action. For example, a car log entry regular made at the time of the trip has more value than one made at the end of the week and much more value than one made at the end of the month. The IRS and the courts can usually spot a log you made the night before you saw the IRS agent. But the IRS and courts also look at other aspects such as do you regularly keep such records. A single entry in your diary for a six-month period showing the detail of a certain transaction carries less weight than if you made regular entries. Finally, sometimes a well-kept diary or log can substitute for missing receipts. But there are some areas of tax law where strict recordkeeping rules won't allow that, e.g., in the case of travel and entertainment receipts, charitable contributions, etc. The law requires a receipt and neither the IRS nor the courts can waive that rule.
May 28, 2026
News
The IRS announced the interest rates for over- and underpayments for the third quarter beginning July 1, 2026. All the rates have increased by 1%. Interest rates on noncorporate over- and underpayments will be 7% (up from 6%), on corporate overpayments the rate is 6%, on underpayments 7% and on large overpayments it's 4.5% and large underpayments 9%.The IRS reported (IR-2026-67) it will offer Saturday hours at select Taxpayer Assistance Centers on May 30. TACs will be open from 9 a.m. to 4 p.m. to provide in-person assistance on a range of tax issues. During this one-day event, TACs in multiple states, the District of Columbia, and Puerto Rico will offer many of their regular services. The IRS encourages taxpayers to visit IRS.gov/SaturdayHours ahead of time to confirm participating locations and available services before heading to an office. TACs will offer most of their typical services during these hours. However, they will not accept cash payments. The IRS plans to continue offering these Saturday service opportunities through June.
Tip of the Day
Look behind the numbers . . . Often the numbers speak the truth. Your sales are up 20% year over year as a result of a new product that's cheaper and better. Or you've introduced a new service boosting revenue and traffic. But before taking the numbers at face value, ask yourself if they make sense. Is it the new product that generated the sales or the fact that your competitor was shut down for three months because of storm damage. If it's the former, you should take steps to take advantage of the new product. If it's the latter, you may still be able to take advantage of the situation, but in a much different way.
May 27, 2026
News
The Treasury Inspector General for Tax Administration (TIGTA) did an audit for Calendar Years 2024 and 2025, and found the IRS selected approximately 7.5 million tax returns through its identity theft filters. The IRS adjusted its identity theft filters to address emerging fraud schemes and risks. The IRS also reviewed tax return selections and revises filters to minimize selections of legitimate tax returns and reduce burden on these taxpayers. For example, the IRS reduced selections of legitimate tax returns from 55 percent in Processing Year (PY) 2023 to 52 percent in PY 2024. The IRS must balance its fraud detection efforts against the burden they may cause taxpayers. To lessen the burden on taxpayers, the IRS resolves and releases selected tax returns without contacting the taxpayer. For example, the IRS resolved 955,000 selections from the identity theft filters in Calendar Years 2024 and 2025 (as of November 2025) without issuing a notice to the impacted taxpayer. For PYs 2023 and 2024 tax returns that required taxpayer authentication, the IRS posted the tax returns within 13 days on average once the taxpayer authenticated. To see the complete report go to www.tigta.gov/sites/default/files/reports/2026-05/2026400019fr.pdf?.
Tip of the Day
Business Tax Accounts . . . The IRS has announced that any tax professional or client who registered as a Business Tax Account user in 2025 as a Designated Official for an S or C corporation must revalidate their status between June 15 and July 29 to renew their role. They must renew annually to maintain access to Business Tax Account. To renew, sign in.
May 26, 2026
News
Section 6050K(b) requires a partnership to provide certain information to transferors and transferees that are parties to a Section 751(a) exchange on or before January 31 of the year following the calendar year of the Section 751(a) exchange. Among other things, the information provided to each transferor and transferee must include the information required to be shown on the partnership's return under section 6050K(a) with respect to such person. T.D. 10048 makes permanent a safe harbor for reporting sales or exchanges of interests in partnerships that contain Sec. 751(a) property. Under the new rules a partnership would be required to furnish the information reported on only Parts I, II, and III of Form 8308, or a statement that includes the same information, to the transferor and transferee in a section 751(a) exchange by the later of (1) January 31 of the year following the calendar year in which the section 751(a) exchange occurred, or (2) 30 days after the partnership has received notice of the exchange as specified under Sections 6050K and 1.6050K-1. The proposed regulations explained that the IRS would update the Instructions for Form 8308 to make clear that a partnership must file a completed Form 8308, including Part IV, as an attachment to its Form 1065. The update to the Form 8308 instructions reflects this. Accordingly, and pursuant to Reg. Sec. 1.6031(a)-1(a)(2), which provides that a partnership return must contain the information required by the prescribed form and the accompanying instructions, a partnership would be required to file the completed Form 8308, including Part IV, as an attachment to its Form 1065, for the taxable year of the partnership that includes the last day of the calendar year in which the Section 751(a) exchange took place.
Tip of the Day
Taking losses . . . Picking winners in the stock market may not be as hard as knowing when to sell. Even the best stocks don't go up forever. They may have a pullback, often after a sharp run up. The pullback can be only a couple of percent or 25 percent or more. Sometimes a stock that's been in favor just loses its momentum and languishes for anywhere from a couple of months to a number of years. Often the reasons are fundamental, that is related to the business, but just as often an industry goes out of favor. Therre's rarely a hard and fast rule. You need to evaluate each stock. Holding a stock that's has no future means that you may be missing out on an opportunity. Holding a stock that's falling will mean losing accumulated gains or, if their are no gains, losing your original investment. Investors who consistently make money usually have a target price and a stop-loss price. They evaluate their position carefully when the stock hits the target and they have price where they're going to sell if the stock drops.
May 21, 2026
News
Notice 2026-33 provides guidance on qualified long-term care distributions, as permitted under Section 401(a)(39) of the Code. In particular, the notice provides guidance to providers of certified long-term care insurance (issuers) relating to the disclosure and reporting requirements under Sections 401(a)(39) and 6050Z. In addition, the notice provides guidance under Sections 72(t)(2)(N) and 401(a)(39) to plan administrators making and individuals receiving qualified long-term care distributions, including setting forth safe harbors for plan administrators in making qualified long-term care distributions. This notice also extends the deadline for a plan sponsor of a defined contribution plan that is not a governmental plan (within the meaning of Section 414(d)), a Section 403(b) plan maintained by a public school, or an applicable collectively bargained plan, to amend its eligible retirement plan to permit qualified long-term care distributions.Tip of the Day
Tax consequences of sale . . . We often say consider economic effects before tax effects. Too many people think a tax benefit will make a poor business decisions profitable. But the tax consequences can be more important on the flip side. You want to generate $20,000 in cash so you sell that much of Madison Inc. stock you bought 5 years ago at $5,000. You won't have that $20,000 for long because you could owe some $4,000 depending on your tax bracket. In the case of real estate or another asset with a mortgage you could generate far less cash than you anticipated. If you've refinanced the property and taken cash out you could end up with very little after taxes. Work through the numbers before or check with your tax adviser before signing.
May 20, 2026
News
You may be able to get relief from paying a liability by showing hardship or inability to pay. In Alphonsus E. Okoli and Margaret E. Okoli (T.C. Memo. 2025-119) the taxpayers owed amounts for taxes and penalties and requested a CDP hearing. During the CDP hearing, the settlement officer (S0) and the taxpayers discussed several issues and explored them in subsequent correspondence. First, the taxpayers desired to have their account placed in currently not collectible (CNC) status. To be entitled to such relief, taxpayers must demonstrate, on the basis of their assets, equity, income, and expenses, that they have no apparent ability to make payments on their outstanding tax liabilities. The SO informed the taxpayers they did not meet the criteria for penalty abatement. A Revenue Officer (RO) reviewed the taxpayers' information and determined that they could pay the liability in full from available assets, including sale of their real estate. As an alternative, the RO found that they could pay a portion of their liability to qualify for a Streamlined IA (installment agreement) with a minimum monthly payment of $2,262. The SO obtained additional information on the taxpayers' exp-expenses but disallowed some of them for lack of substantiation. The payments could be reduced to $1,892 based on the new information but still above the taxpayers' proposed $250. The Tax Court noted that its review is for an abuse of discretion by the SO and the taxpayers presented no evidence that the SO failed to act on information that was in fact submitted to her. In addition, the Tax Court has routinely held that an Appeals officer does not abuse her discretion when she rejects an IA because a taxpayer refuses to liquidate assets to satisfy his tax liabilities.Tip of the Day
Caution on contracts . . . Contractors have learned that anything more than a immediate one-week job can be subject to cost increases that can devastate a profit margin. Estimates have to have a short time limit or provision for price increases. That's particularly true right now. The cost of many materials have increased, some sharply. And there are many other examples of outsized price increases in other industries. The reasons for the increases vary, and many may be short-lived, but they can still impact even relatively short-range contacts and estimates.
May 19, 2026
News
Normally you're jointly responsible for your and your spouse's share of the taxes on a joint return. And if one spouse can't pay the responsibility can fall on the other spouse, in part or in full. But there is limited relief. In Jodell Sample (T.C. Memo. 2025-118) the husband had a professional practice and the wife worked for him as an office manager and receptionist. The taxpayer-wife had a high school education and relied on her husband to take care of the finances. The couple legally separated after a number of years of not paying their full tax liability. The terms of the separation were unusually favorable to the taxpayer. The husband agreed to be solely responsible for their federal and state tax debts. The wife received one of their shared cars, their main residence in Minnesota, a second home in Montana, and the husband's entire 401(k) account. The legal separation did not result in a physical separation. While the wife filed numerous innocent-spouse requests, she has continued to live with her ex-husband in their marital home, at least into 2021 and with nothing in the record to suggest that this arrangement has not continued. The Tax Court looked at the sections of the innocent spouse relief provision and examined various factors and granted relief during the early years at issue but denying relief once she learned of the IRS's visit to her husband's office. Before then, she was reasonably ignorant of her husband's underpayments for 2011 through 2013. But the Court also found she knew of the understatements-very substantial understatements-starting with the 2014 return. The Court granted her equitable relief for tax years 2011 through 2013 and denied her relief for tax years 2014, 2017, and 2018.Tip of the Day
Municipal bonds for income? . . . The theory is if you're in the top tax bracket and tax rates increase, the tax-exempt feature of munis will be more attractive. That does make sense. But buying individual municipal bonds can be expensive. Look for a fund with low expenses and a good portfolio. If you're in the lower brackets the tax-exempt feature may not be worth it. Talk to your investment adviser before making a move.
May 18, 2026
News
The IRS has updated (HI-2026-01) the disaster relief notice for tax relief for individuals and businesses in the State of Hawaii affected by flooding and mudslides due to severe storms that began on March 10, 2026 to change the July 8, 2026 filing of various federal individual and business tax returns and make tax payments to August 20, 2026. The notice continues to apply to individuals and households that reside or have business in Hawaii, Honolulu, Kauai and Maui counties. The extended deadline applies to individual income tax returns and payments normally due on or after March 10, 2026. Penalties on payroll and excise tax deposits due on or after March 10, 2026, and before March 25, 2026, will be abated as long as the tax deposits are made by March 25, 2026.Tip of the Day
Noncompete agreements . . . There are some documents you can download off the web and they'll work just fine. But that's certainly not universally true. For one thing, laws vary among states. And noncompete agreements are one of those documents that shouldn't be used lightly. Many states have laws preventing an employer from overly restrictive noncompete agreements. And in some cases a noncompete agreement doesn't even make sense. A noncompete is designed to prevent an employee from going to another employer and taking customers, trade secrets, or special knowledge with him and adversely affecting your business. But a former employee has a right to earn a living in his field of expertise. Get good advice from your attorney.
May 15, 2026
News
Exempt organizations with a calendar year should remember that May 15th is the Federal filing deadline and late filing can be costly. You can request a six-month extension using Form 8868.Individuals may be able to get an installment agreement from the IRS online if the amount requested is less than $50,000 and they have filed all required tax returns. (The threshold amount is $100,000 for a short-term installment agreement if the term is no more than 120 days.) In Gary B. Nelson (T.C. Memo. 21025-117) the taxpayer sought an installment agreement and a CDP hearing was scheduled. The scheduling letter further requested certain information from the taxpayer including a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, as well as signed tax returns for 2020, 2021, and 2022. The taxpayer failed to respond to the request nor did he call into the CDP hearing. The Appeals officer gave him an additional 14 days to provide and information he wanted considered. Again no response. Nearly six months passed before the Office of Appeals issued a notice of determination upholding the proposed levy. The notice observed that the taxpayer "had not challenged the existence or the amount of the liability for the tax period[s] at issue" and that the "balances are the result of . . . self-filed tax returns with insufficient tax withholdings." The notice further explained that the installment agreement in which Mr. Nelson expressed an interest could not be considered because he was "not available for the hearing and . . . did not submit a completed Form 433-A . . . with supporting financial documentation." The taxpayer did not challenge the issues at trial but the Court added that even if the installment agreement issue were properly raised the taxpayer would have fared no better because of the failure to submit the request information. The Court granted summary judgment to the IRS.
Tip of the Day
Disputing a charge? . . . We're not talking about your credit card but a transaction such as business purchases, rent, etc. While the issue is in dispute you should probably put the amount of the dispute in an escrow account so that the money is available should you lose the issue. Unless you can clearly show you're in the right (e.g., you've been denied use of the rent space, etc.) the first step should be to consult an attorney.
May 14, 2026
News
The IRS announced (IR-2026-65) the terms of a time-limited settlement opportunity for eligible taxpayers involved in conservation easement or historic preservation easement disputes with the IRS. Since 2020, the IRS has offered settlement initiatives in these cases that were significantly more favorable than the outcomes taxpayers have generally achieved in the Tax Court. Under each of those prior initiatives, taxpayers were required to pay penalties on their underpayments and were not permitted to claim a charitable contribution deduction for the claimed donation, being limited solely to a deduction for estimated out-of-pocket costs. Nonetheless, the prior settlement initiatives resolved 405 cases, with 32% of all offers accepted. This new time-limited settlement opportunity is intended to advance the goals of the prior initiatives while addressing barriers that may have discouraged acceptance. Today, there are over 1,100 conservation easement cases (around 740 docketed cases in Tax Court and 400 cases in Exam). Under this new offer initiative, nearly 450 cases will no longer be required to make an upfront payment of the settlement amount, and instead the liability will be subject to post-settlement collection as described below. Separately, as many as 500 cases where prior settlement offers expired or were rejected by the taxpayer will have the renewed ability to settle their cases. The offer will also be extended to as many as 175 cases that did not previously have the opportunity to participate in an IRS settlement initiative. For a period of 90 days following the issuance of a settlement letter, the following terms will be available to an eligible partnership:
This settlement opportunity is not available in every conservation easement or historic preservation easement case. Specifically, this settlement is not available in cases. Click on the link above for more information.
Tip of the Day
Specific bequests in a will . . . Estates have a nasty way of creating rifts among the closest relatives. And often it's not the size of the bequest, but one or more items. Fred may not care that he got the larger share of the inheritance, he's upset he didn't get the lake property where he spent summers and proposed to his wife. Because of the way the will was written the property had to be sold and the proceeds divided. Often the best approach is to talk to the heirs and find out what they want and either put that as a specific bequest in the will.
May 13, 2026
News
Some areas of a tax return get more scrutiny than others. One of those is the earned income tax credit (EITC). That's partly because the dollar amounts can be relatively significant and partly because it's a complex issue. The amount of the credit depends on whether you're single or married, your income, and the number of qualifying children (or individuals), if any. To be considered a qualifying child an individual must (1) bear a relationship to the taxpayer as described in section 152(c)(2); (2) have the same principal place of abode as the taxpayer for more than one-half of the taxable year; (3) meet the age requirements described in section 152(c)(3); and (4) not have filed a joint return with the individual's spouse for the taxable year. The parties agree that the "qualifying individual" (here a disabled person) met the first and fourth requirements. The IRS contends that the she did not meet the second and third requirements. In John R. Graham and Nicole Graham (T.C. Memo. 2025-116) the taxpayer testified that the individual lived with the taxpayers for more than six months in the year at issue and that she suffered a stroke, was not able to care for herself and was confined to a wheelchair. However, the taxpayers provided no documentation to support the claim the individual lived with them or was permanently and totally disabled. The Court sustained the IRS's denial of the claim.Tip of the Day
Not every solution need be high tech . . . There's no question that computers have made most work easier. But there are times when a low tech solution is easier and faster. If you're doing some computations only once and they're not that complicated, grab the calculator and a pencil rather than opening a spreadsheet. You can use a computer to schedule multiple processes in a small job, but you can often do it quicker with paper and pencil or a whiteboard. Whiteboards can be particularly useful. There are other examples. Got a dozen nails to drive? You could use a nail gun, but by the time you move the compressor and drag the hose the job would be long done if you used a hammer.
May 12, 2026
News
In the past you could deduct a number of miscellaneous itemized including legal fees directly related to the production of income. That's no longer true. But the case of Joanne G. Rosso (T.C. Memo. 2025-115) brings out several important points about legal fees. Here the taxpayer did not show that the fees were directly related to the production of income. The relationship between the expenses and what generated them is still important. For example, you might incur legal fees related to a rental property. Expenses incurred related to the purchase of the property are not deductible but must be capitalized as part of the purchase price. On the other hand, expenses related to a defending a suit from a tenant who slipped on an icy walk are deductible. While decided under prior law, the Court held that the legal fees were not related to income production purposes but were personal in nature.Tip of the Day
Homeowner's associations . . . You may have heard some horror stories. Some are true. Homeowner's associations can be responsible for many aspects of a development from just the winter snowplowing of the roads to the structural integrity and the mechanicals of an high-rise condo. A properly run association will budget for capital expenditures such as refurbishing the swimming pool and roads and assess an amount for a reserve. If you're buying a property that has an HOA you should know what the annual cost is and how the HOA has performed over the years. Be aware that in most cases failure to make payments will result in a lien on your property and, depending on state law and the HOA rules, they can foreclose on you for nonpayment.
May 11, 2026
News
The IRS has announced that due to the planned retirement of the Filing Information Returns Electronically (FIRE) System, the IRS will no longer accept new Information Returns (IR) Applications for Transmitter Control Codes (TCCs) beginning July 21, 2026. Existing applicants can continue to update their applications through December 2026, after which they will become read-only and retained for historical reference. Current FIRE users must complete an Information Returns Intake System (IRIS) Application for TCC and transition to IRIS for electronic filing beginning with the 2027 filing season. IRIS will be the only information returns electronic filing system, including current year, prior year, or corrections, after January 1, 2027. For additional information, visit IRS.gov/iris.In Jeffrey L. Daines, et al. (U.S. District Court, E.D. Wisconsin) the taxpayers sought to establish an employee stock ownership plan (ESOP). To do so, they enlisted a company called Byers that touted a proprietary system that would afford certain tax benefits. They set up the ESOP, thus creating an Employee Stock Ownership Plan, and for years things went as all had expected. The IRS then began to look closer at the methods that the consulting company employed for the taxpayers and other clients. The IRS eventually disqualified the ESOP at issue. The taxpayers are challenging that in Tax Court. In this action they argue that the IRS's actions constituted legislative rulemaking. The taxpayers argue that the IRS's actions violated the Administrative Procedure Act (APA) because the IRS did not follow the APA's notice and comment procedure. The IRS has now moved to dismiss the taxplayers' amended complaint, again arguing that there is no such thing as the Byers Rule and the agency actions the plaintiffs are complaining about are not subject to the APA. The Court held that insofar as the taxpayers are arguing that the IRS enforcement action constituted or was premised on a new rule because it reflected a change in the IRS's years-long practice of implicitly accepting the Byers ESOP system, the argument is without merit. The IRS does not and cannot police every transaction. As a result, it commonly may take action only after years of apparent acquiescence. Such inaction does not estop later enforcement.
Tip of the Day
State disaster relief . . . When the disaster is significant enough the president will designate a FEMA disaster area eligible for tax relief. Your state may have it's own relief program unrelated to the federal one or for smaller disasters that don't qualify for federal relief. It can take any number of forms from postponed filings to tax credits, incentive payments, real estate tax relief, loans, grants, etc. These may not be as well publicized. You may be able to contact a local official or the state for information. The state house or senate representative for your district may have or be able to get information.
May 8, 2026
News
The IRS announced (GA-2026-03) tax relief for individuals and businesses in parts of Southeast Georgia that were affected by wildfires and straight-line winds that began on April 18, 2026. These taxpayers now have until Aug. 20, 2026, to file various federal individual and business tax returns and make tax payments. Following the disaster declaration issued by the State of Georgia, individuals and households that reside or have a business in Clinch, Echols, and Brantley counties qualify for tax relief. The same relief will be available to any other counties added later to the disaster area. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after April 18, 2026, and before Aug. 20, 2026, are granted additional time to file. As a result, affected individuals and businesses will have until Aug. 20, 2026, to file returns and pay any taxes that were originally due during this period. Click on the link above for more information.The IRS released its annual update to Form 656-B, Offer in Compromise Booklet. An Offer in Compromise is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed. The booklet includes all the forms small businesses need to file an offer in compromise and includes new information on how to file an offer electronically through an IRS Individual Account. It also leads small businesses and tax professionals through a series of steps to help calculate an appropriate OIC based on assets, income, expenses and future earning potential. For more information, see the offer in compromise page on IRS.gov.
Tip of the Day
Hiring? Make sure there's a culture match . . . There's always been cultural differences between industries and companies. In some industries and companies working 20 hours of overtime a week is expected; in others overtime is frowned on. Some companies foster competition among employees, in others it's discouraged. In some cases moving from one industry to another can be cultural shock. That's more often the case when an employee from a laid-back firm moves to a high-pressure, short-staffed one. But the reverse can also be true. There are often big culture differences between small companies and large firms. Family owned companies can have cultural issues. If you're hiring you should be aware of the differences and that should be an important point discussed with the prospective employee. Some people can adjust, but a high percentage will find it difficult, and that difficulty increases with the time spent in the culture. You're doing both the employee and your firm a disservice if there's a poor fit.
May 7, 2026
News
The IRS announced updates to its Conservation Easement site, expanding information on abusive conservation easement transactions, recent court decisions, and warning signs for investors. "Congress created the conservation easement deduction to encourage genuine preservation, not to subsidize abusive tax shelters," said IRS Chief Executive Officer Frank J. Bisignano. "The updated information on IRS.gov explains why the IRS continues to challenge these transactions and highlights the serious risks taxpayers face when they are sold inflated tax benefits disguised as conservation." The IRS reminds taxpayers that, while properly structured conservation easements can provide important public benefits, promoter-driven transactions are often built on inflated valuations that can lead to disallowed deductions, substantial penalties and other consequences. The updated Conservation Easement site addresses these issues in detail. The IRS also announces that it will soon release the terms of a time-limited settlement opportunity for eligible taxpayers involved in these transactions. Following that announcement, the IRS will extend settlement offers to eligible partnerships to provide an opportunity to resolve the federal tax consequences of these transactions with certainty.Tip of the Day
Temp or permanent hire? . . . If you're uncertain about the future of your business but you're understaffed, consider hiring a temp or an independent contractor rather than a full-time employee. A side benefit could be checking out the worker before taking him or her on full time. It may be a bit more expensive, but better than going through the expense of hiring and then later laying them off.
May 6, 2026
News
Even if you've complied with all the procedural requirements you could still lose out on a charitable contribution deduction if the property valuation is considered speculative. Generally property is valued at the highest and best use. Land that is not productive may be valued at what it would be if productive, less the cost to make it productive. But that approach can contain many assumptionsIn Paul-Adams Quarry Trust, LLC, Francis L. Adams, Tax Matters Partner (T.C. Memo. 2025-112) the partners bought property for some $430,000 ($2,073 per acre) in 2007. Starting in late 2010, the partners quarried granite on the property. They experienced significant losses and abandoned the effort in 2012, contributing the property to the LLC. In December 2017, LLC granted a conservation easement to a qualified organization. The LLC claimed on its tax return a charitable contribution deduction of $10,234,108 (about $49,364 per acre) for a "qualified conservation contribution". It attached to the return an appraisal supporting the deduction and taking the view that the highest and best use of the property was granite mining. When the IRS examined the partnership return it performed it's own appraisal of the property and arrived at a value of $612,000 for the easement. The Court challenged a number of the assumptions in the LLC's valuation of the property, including the fact the property was not a working quarry at the time of the contribution. The Tax Court accepted the IRS's valueand sustained a gross valuation misstatement penalty.Tip of the Day
Emergency funds first . . . Unless you're planning on inheriting a lot of money you should be saving for your retirement on a regular basis. Using your tax refund to invest is a good idea, but weekly or monthly investments are vital. Not only will funds accumulate faster, you'll be dollar averaging meaning you won't overpay at the top of the market. The disadvantage of putting funds into your 401(k), IRA, etc. is that if you need them in an emergency not only will you pay tax on the funds (possibly at the wrong time) you'll also owe a 10% penalty unless you meet an exception or are 59-1/2. But before putting money in a retirement fund you should have a decent emergency fund. How much? That depends on your specific situation. Own a home? A new septic system could run you $15-20,000. Same for a new roof. The roof you can plan for. The septic probably not. Live in a state with natural disasters like wildfires, hurricanes, etc.? You'll need extra funds. Got a job that's less than rock solid? On the other hand are your parents looking to replace their 5-year old, 60-foot yacht? You may be able to get help with a bank loan. You can't cover all the possibilities, but you should take some time to consider them and your options.
May 5, 2026
News
If you want to challenge a a determination by the IRS Independent Office of Appeals (Office of Appeals) upholding a notice of intent to levy with respect to unpaid federal income tax liability you've got to show a mistake on the part of the Service. In Carol Rae Foulds (T.C. Memo. 2025-111) the taxpayer argued the notices of deficiency were not properly mailed. The Court noted discrepancies in the IRS proof of mailing (USPS Form 3877), but that nonetheless the notices were properly mailed. The Court also noted the Office of Appeals (1) properly verified that the requirements of applicable law or administrative procedure were met, (2) considered any relevant issues the taxpayer raised, and (3) weighed "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary." The Court found no abuse of discretion by the IRS.The IRS announced (NMI-2026-01) tax relief for individuals and businesses affected by Super Typhoon Sinlaku in the Commonwealth of the Northern Mariana Islands that began on April 11, 2026. These taxpayers now have until Nov. 2, 2026, to file various federal individual and business tax returns and make tax payments. Following the disaster declaration issued by the Federal Emergency Management Agency (FEMA), individuals and households affected by Super Typhoon Sinlaku that reside or have a business in the Northern Islands, Rota, Saipan and Tinian qualify for tax relief. Click on the link above for more information.
Tip of the Day
Collectibles . . . That baseball card collection from the 80's may not be worth much, but many people have other items they've collected over the years. And they may be very valuable. That ugly lamp from your grandmother, the crock your mother picked up 40 years ago, etc. You may not have collected paintings but just inherited one from relatives. Even mundane items such as vacuum tubes from the 50's and 60's which went for $1.50 then could be worth $40 today. Not a windfall, but your father saved them and has over 80. Check the internet to see what the items could be worth and make sure your heirs know there may be value there. Your son or daughter might throw out $4,000 worth of tubes because they were taking up space. Another point. Homeowner's insurance may not cover that painting, stamp collection, etc. Check to see if the items are covered and, if not, discuss your options with your agent.
May 4, 2026
News
The IRS has issued temporary regulations and the accompanying notice of proposed rulemaking on a new method for recovering federal excise tax paid on dyed fuel established under the One, Big, Beautiful Bill. These temporary regulations provide the procedures by which a taxpayer may recover federal excise taxes paid on clear diesel fuel or kerosene if that taxpayer later removed the fuel from a terminal as dyed fuel for nontaxable use. They also limit the claimants to taxpayers that paid to the IRS the original tax on the dyed fuel to which the claim relates. The temporary regulations provide guidance to determine eligibility and rules for filing a claim for a dyed fuel refund. Taxpayers who paid tax on diesel fuel or kerosene and later removed the fuel from a terminal as eligible dyed fuel on or after Dec. 31, 2025, can submit a claim for refund, provided the requirements are met. For more information go to IR-2026-59 for a synopsis of the rules or click on the link above for the temporary regulations.Tip of the Day
Money laudering rules . . . The government has found that some banks, credit unions, etc. have been lax in their requirement to tighten up anti-money laundering activities. And, when your bank gets pressured expect to be pressured if you deal in cash or other activities that suggest laundering. The IRS is also advising taxpayers of the requirement to report cash received from customers in amounts of more than $10,000. You can get more information in IRS Publication 1544, Reporting Cash Payments of Over $10,000. Keep in mind there are stiff penalties for failing to report receipts of cash.
May 1, 2026
News
In Crystal R. Vettel (T.C. Memo. 2025-110) the taxpayer and her spouse failed to report both the foreign bank accounts and the income from them. They entered into and then withdrew from the Offshore Voluntary Disclosure Program (OVDP). The IRS audited their returns and assessed additional taxes as well as fraud and accuracy-related penalties. The taxpayers filed a petition with the Tax Court and a stipulated decisions was reached. Subsequently, the taxpayer-wife sought innocent spouse relief, the current case. The Court noted that when a court of competent jurisdiction enters a final judgment on the merits of a cause of action, the doctrine of res judicata, if properly and timely invoked, binds the parties to the judgment as to all matters that were or could have been litigated and decided in the proceedings. Common law principles of res judicata generally bar a party to a prior proceeding for the same tax year from seeking innocent spouse relief regardless of whether the party raised the claim in the prior proceeding. However, because res judicata is an affirmative defense that must be pleaded in the answer, the IRS bears the burden of proving that petitioners' claim is precluded under the doctrine of res judicata. Under Section 6015(g)(2), to escape the effect of res judicata from prior litigation, the requesting spouse must show (1) that her innocent spouse claim "was not an issue" in the prior proceeding, and (2) that she did not "participate meaningfully" in the prior proceeding. The Court, after reviewing the taxpayer's participation in arriving at the settlement in the prior case, did participate meaningfully in the settlement, noting the Court has previously held that Section 6015(g)(2) "contemplates that participation through counsel in a prior proceeding can constitute meaningful participation that triggers res judicata and bars a subsequent innocent spouse case."Tip of the Day
Found a mistake on your return? . . . If you discover an error after filing a federal tax return may need to file an amended return. There are some instances where an amended return isn’t required such as when the IRS corrects errors during processing or requests missing forms or schedules separately. To claim a refund, an amended return must generally be filed within:
If the original return was filed early, the three-year period begins from the April tax deadline. Special rules apply when there are net operating losses, foreign tax credits, bad debts or other issues. Additionally, taxpayers in disaster relief situations, combat zone service, have bad debts, foreign tax credits, or loss or credit carrybacks, may have more time to file an amended return. For more information and links to other resources, go to When and How to Amend a Tax Return.
Copyright 2026 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536