A recent U.S. Tax Court order in Bowen v. Commissioner had tax professionals talking this week. Some tax pros view it as a setback for taxpayers seeking COVID-era penalty and interest relief. But I think that’s an overstatement—the order is narrower than some early reactions suggest.
The taxpayers relied primarily on two previous cases—Abdo v. Commissioner, in which the Tax Court held that the COVID-19 disaster relief provisions automatically extended certain filing deadlines, and Kwong v. United States, in which the Court of Federal Claims concluded that the pandemic postponement period ran through July 10, 2023, potentially supporting claims for refunds of interest and some penalties.
In Bowen, the court did not decide whether the pandemic disaster period extended tax deadlines. Instead, it held that even if those deadlines were extended, the extension would not eliminate accuracy-related penalties, which are based on underpayments rather than missed filing or payment deadlines. The order also didn’t consider the taxpayers’ challenge to interest, not because the claim lacked merit, but because the Tax Court concluded it did not yet have jurisdiction to decide that issue since the case is ongoing.
Still, Bowen offers insight into how one Tax Court judge views the relationship between COVID-19 disaster relief and accuracy-related penalties, while leaving the broader questions open. Stay tuned (I’ve predicted a SCOTUS review on this whole family of cases and stand by that).
Another issue drawing attention this week was access to Social Security field offices. A group of Democratic senators is demanding answers from Social Security Commissioner Frank Bisignano after reports that some Social Security field offices stopped offering in-person services. In a letter this week, the senators questioned whether those reported closures conflict with Bisignano’s pledge to keep every field office open. While many routine transactions can be completed online, more complicated matters—such as survivor benefits, some disability claims, and appeals—often require speaking with an agency employee, making access to local offices important.
The inquiry comes while Bisignano also oversees day-to-day operations at the IRS as the “CEO”, raising questions about customer service at two of the federal government’s largest public-facing agencies. The senators point to staffing shortages and employee reassignments as contributing to service disruptions, while the Social Security Administration disputes that characterization. The agency sent a statement to Forbes stating that “None of SSA’s field offices are closed or offering limited service due to staffing issues.” Any temporary closures or service limitations, the agency says, are due to renovations, maintenance, or other facilities-related problems rather than workforce shortages.
Outside of the tax world, one of the biggest stories focused on FIFA’s plan to sell a stake in a new company that would control the commercial operations of the World Cup and other major competitions. The move has triggered fierce opposition from UEFA, which governs soccer in Europe, and CONCACAF, which governs soccer in North America, Central America, and the Caribbean.
Under the proposal, the new company, FIFA Forward Enterprise, would manage broadcast, sponsorship, licensing, hospitality, and ticketing rights, and outside investors led by Thrive Capital (founded by Josh Kushner) would receive a share of future returns. FIFA says the deal could generate substantial new funding, but critics argue that introducing private investors could shift the organization away from its mission to promote the global development of soccer.
The proposal also raises tax and governance questions. FIFA is organized as a nonprofit association under Swiss law, and its commercial success has historically been justified as supporting its broader mission. Selling a stake to investors seeking a financial return would not automatically jeopardize that status, but the final structure, investor rights, and use of profits could affect how tax authorities, including the IRS, view FIFA and related organizations. It could also complicate future demands for the tax concessions that countries have traditionally granted to FIFA and its partners when hosting the World Cup.
In more personal news, I’m looking forward to having two of my three kids here for the weekend. My son has been splitting time between his college apartment and home (we have better food), while my youngest daughter has been studying in Paris (les baguettes vont lui manquer). They’re both headed home, which means we’ll have a full house—including my mom and my mother-in-law—for Waffle Sunday (if you’re a part of Tax Twitter, you know this already).
My oldest remains in Berlin. Germany did not make Forbes’ list of The Best Places To Retire Abroad In 2026, but France and Spain did (my son studied in Spain last year and has been plotting a return). Overall, 24 countries made the list, with 96 recommended spots, based on amenities, costs, health care, climate risk and whether U.S. retirees are welcome. You can check it out here.
If you’re still not certain whether—and where—to make the jump, you can find out how six Americans picked their retirement spots here.
And with that, I’m off to dream of waffle batter. Until next time, may your deadlines be reasonable, your QR codes lead where they’re supposed to, and all of your government agencies answer the phone.
Enjoy your weekend,
Kelly Phillips Erb (Senior Writer, Tax)
This is a published version of the Tax Breaks newsletter, you can sign up to get Tax Breaks in your inbox here.
Questions
This week, a taxpayer asked:
Thanks for your story about claiming a parent as a dependent. I have a follow-up question. If I claim my mom who lives with me and she sells her home, would she lose the exemption for the sale of her home?
You’re thinking of the section 121 home sale exclusion, which allows taxpayers to exclude up to $250,000 in gain on the sale of a home ($500,000 for married taxpayers filing jointly), assuming that they meet the criteria.
Your mom would not lose the exclusion simply because you claim her as a dependent. The dependency rules and the home sale exclusion are separate provisions of the tax code, and being claimed on someone else’s return does not, on its own, disqualify a homeowner from excluding gain on the sale of a principal residence.
To qualify for the section 121 exclusion, the homeowner generally must satisfy both the ownership and use tests. That means that during the five-year period ending on the date of sale, your mom must have owned the home for at least two years and used it as her principal residence for at least two years. Those two years do not have to be continuous.
She may also qualify for the $500,000 exclusion available to certain surviving spouses. If your mom had been married and her husband died in 2025 or 2026, she can claim the higher exclusion if the timing works. The sale must occur within two years of your mom’s husband’s death and they must have satisfied the applicable ownership and use requirements before his death. Additionally, she must not be remarried before the sale. Otherwise, the usual $250,000 exclusion for an unmarried taxpayer would apply.
The bigger issue may be whether the home sale affects your ability to claim her as a dependent. To qualify as a dependent under the qualifying relative rules, her gross income generally must remain below the annual threshold ($5,300 for 2026), and you must satisfy the other support and relationship requirements.
Gain that is fully excluded under section 121 generally is not included in gross income for purposes of the dependency income test. However, if the gain exceeds the exclusion amount (for example, assume her gain was $700,000 and she qualified for the $500,000 exclusion), the taxable portion (in our example, $200,000, the amount over the exclusion amount) would count toward her gross income. A big enough taxable gain could prevent you from claiming her as a dependent for that year.
So, being claimed as a dependent does not jeopardize your mom’s section 121 exclusion. But the taxable portion of the home sale gain, if any, could affect whether she remains eligible to be claimed as a dependent.
(Have a question to submit? Or a follow-up question? Email me.)
Statistics, Charts, and Graphs
Don’t assume your unvested stock compensation disappears if you die. While many equity awards are forfeited when an employee leaves a company, death is often treated differently under stock plans. In fact, many employers allow restricted stock units (RSUs) to continue vesting after an employee’s death, and some even accelerate vesting so that all remaining awards become fully vested. The exact treatment depends on the terms of the company’s stock plan and the individual grant agreement.
As the chart shows, a majority of companies surveyed by the National Association of Stock Plan Professionals continue vesting for at least some RSU grants after death, with more than half accelerating vesting for all outstanding grants. Some treat it as discretionary.
Because these provisions can significantly affect the value passed on to your heirs, it’s worth reviewing these agreements and discussing them with your tax and estate planning advisors.
Taxes From A To Z: C Is For Capital Gains
A capital gain is the profit you make when you sell a capital asset (if you lose money, it’s a capital loss). Capital assets include things like stocks, mutual funds, real estate, and even collectibles. For example, if you buy 100 shares of stock for $5,000 and later sell them for $8,000, you’ve realized a $3,000 capital gain.
The tax treatment depends on how long you owned the asset. If you held the stock for one year or less, the gain is generally short-term and taxed at your ordinary income tax rate. If you held it for more than one year, it’s usually a long-term capital gain, which qualifies for lower tax rates for most taxpayers. Most taxpayers pay 15% for long-term gains. If you bump up into a higher bracket, you don’t pay the higher 20% rate on all your gains—you pay 20% on the portion over the bracket threshold (the brackets are progressive, just like the federal income tax). You can find the brackets for those rates here.
(Since this is tax, exceptions apply, including those for art, collectibles, and section 1250 gain related to depreciation.)
It’s easy to be overwhelmed when looking at a sale. But keep in mind that your check in hand doesn’t necessarily represent your taxable gain. Keep great records to help you figure the difference between the sale price and your adjusted basis.
Tax Trivia
Taxpayers of a certain age may have Social Security numbers that look similar to those of their peers, depending on where they lived when their numbers were issued. That’s no longer the case—your Social Security number is now random. When did that change happen?
(A) 1973
(B) 1987
(C) 1995
(D) 2011
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS has released the Applicable Federal Rates (AFRs) for August 2026. These rates change monthly and serve as the IRS’s minimum interest rates for many private loans and financing arrangements. If you’re lending money to a family member, financing the sale of a home or business, or structuring an installment sale, the AFR may determine the minimum interest rate you should charge to avoid unintended tax consequences. You can find the rates in the latest Internal Revenue Bulletin.
Noteworthy
The IRS observed National Whistleblower Day on July 30. The day is intended to recognize individuals who report wrongdoing and help protect public resources. Since the IRS Whistleblower Program began in 2007, tips have helped recover more than $8 billion, with over $1.4 billion paid in awards.
The IRS and crypto platform Coinbase are warning about a convincing new scam. Scammers are sending official-looking letters in plain envelopes claiming that crypto holders must “enroll” in a Digital Asset Compliance Portal, or DACP, before a deadline. The letter includes a QR code that leads to a fake IRS website. This is a scam. The portal does not exist.
Key Figures
That’s the excise tax rate that may apply when you fail to take your full required minimum distribution (RMD) from your retirement account. Due to a change in the law, the penalty is now 25% of the amount that should have been withdrawn, down from 50%. And it can be reduced to 10% if you correct the mistake within the applicable correction window, which generally ends on the earliest of the date a deficiency notice is mailed, the date the tax is assessed, or the last day of the second tax year following the year of the missed distribution.
In some cases, the penalty may be waived entirely if you can show reasonable cause, such as illness, a death in the family, or reliance on incorrect professional advice. To request a waiver, file Form 5329 and explain the circumstances.
Trivia Answer
The answer is (D).
Until June 24, 2011, Social Security numbers weren’t completely random. They followed a pattern:
- The first three digits (the “area number”) generally corresponded to the state where the SSN application was made—not necessarily where the person was born.
- The middle two digits (“group number”) followed a published pattern that helped the SSA manage number assignments.
- The last four digits (“serial number”) were assigned consecutively within each group.
Because the numbers were somewhat predictable, people could often estimate where someone obtained their SSN and, in some cases, narrow down when it was issued. To keep numbers more private, the agency began randomizing numbers.
A fun math note: If every digit could be anything from 0 to 9, there would be 1,000,000,000 possible combinations, ranging from 000-00-0000 to 999-99-9999. But the SSA doesn’t use all combinations.. Taking some of those restrictions into account, the theoretical maximum number of valid Social Security numbers is 888,931,098. Today, SSA says there are approximately 420 million numbers still available.
Worth A Second Look
The links, clips, and tax takes readers loved (and a few you may have missed):
You can find last week’s newsletter here.
Tax Filing Deadlines
📅 September 15, 2026. Due date for your 2026 Q3 estimated tax payment.
📅 October 15, 2026. Due date for individual taxpayers filing on extension (payment was still due April 15).
Tax Conferences And Events
📅 August 4-6. IRS Nationwide Tax Forum. New Orleans, Louisiana.
📅 August 25-27. International Association of Financial Crimes Investigators (IAFCI) International Training Conference. Nashville, Tennessee.
Feedback
We’d love your thoughts. What’s helpful? What’s confusing? What tax topics do you want more of? Email me directly—I read every message.
If you have a tax question, conference or tip for me, check out our guidelines and submit it here.
Read the full article here