A decision in federal court may mean that you are eligible to claim refunds of penalties and interest tied to the COVID-19 periodgettyTax season is (mostly) over, but we’re still talking about refunds. But this time, the chatter isn’t about refunds tied to the 2025 tax year, but for those well before then. A recent federal court decision in Kwong v. United States could open the door for taxpayers to claim refunds of penalties and interest tied to the COVID-19 period. The court held that under Section 7508A, tax deadlines were automatically paused for the entire duration of the federally declared disaster (January 20, 2020–May 11, 2023), plus an additional 60 days. That interpretation extends the statute of limitations for certain refund and abatement claims—potentially giving taxpayers until July 10, 2026, to act. This creates an opportunity for individuals and businesses who were assessed failure-to-file or failure-to-pay penalties (or related interest) during that window to seek relief. However, the decision is not final and may be appealed, meaning taxpayers may want to file “protective claims” now to preserve their rights. Even then, success isn’t guaranteed—Kwong itself resulted in only a partial recovery—so careful evaluation of each claim is essential. A less fun conversation for many taxpayers is figuring out how to actually pay what they owe—and the IRS offers more flexibility than people might expect. Taxpayers who can pay in full have lots of options, including check or money order, direct bank payments through IRS Direct Pay, debit or credit cards (with fees), digital wallets, cash at participating retailers, or even wire transfers. Each method has its own limits and considerations, but the key takeaway is that paying electronically is increasingly the norm, even as traditional options like checks remain available for now (fun fact: the IRS won’t accept single checks or money orders for $100 million or more). For those who can’t pay right away, there are still options. The IRS offers installment agreements to pay over time, offers in compromise for qualifying taxpayers who truly can’t pay in full, and temporary collection delays in certain circumstances. Interest and penalties may continue to accrue, but taking action—rather than ignoring the bill—can prevent more serious consequences. The IRS now also provides a Tax Debt Help tool that walks taxpayers through their options, making it easier to choose the best course based on their financial situation. I gave it a whirl, and it’s surprisingly useful.For some taxpayers, the key to avoiding owing taxes is to use tax-planning strategies, like tax-harvesting. Investors have long used tax-loss harvesting to offset gains, but a growing body of research suggests that exchange-traded funds (ETFs) may be creating a workaround to the IRS wash sale rules. While the law disallows claiming a loss if you repurchase the same or “substantially identical” security within 30 days, the definition of “substantially identical” is murky—especially for ETFs that track nearly identical indexes. A recent study found that institutional investors are increasingly swapping highly correlated ETFs to realize losses without meaningfully changing their market exposure, generating an estimated $84 billion in losses over time. The findings highlight a gap between the intent of the wash sale rule and modern investment practices, raising questions for both taxpayers and policymakers.You can also lower your tax bill by taking advantage of tax breaks at the office—like employer-funded health care and retirement plans. But while many workers can take advantage of a retirement account, the Mega Backdoor Roth is a strategy designed for high earners who have already maxed out their standard 401(k) contributions. It works by allowing after-tax contributions to a 401(k) (beyond the usual deferral limits) and then converting those funds into a Roth account. If structured correctly, this can allow up to $47,500 per year to be shifted into a tax-favored account—well above the limit for traditional Roth IRAs and without income restrictions.That kind of contribution capacity can make a meaningful difference over time, especially for those concerned about future tax rates, required minimum distributions, and overall retirement flexibility. However, not all employer plans allow after-tax contributions or in-service conversions, so eligibility depends on plan design. When available, though, the Mega Backdoor Roth can be a highly effective way to build a sizable pool of tax-free income alongside other retirement savings.Another work-related perk has been around since 1978, but is now getting a fresh look. Section 127 of the tax code allows employers to provide up to $5,250 per year in tax-free educational assistance to employees, covering expenses like tuition, fees, books, and even—thanks to more recent updates—student loan repayment (even if you took out your loans a while ago). The benefit is excluded from the employee’s taxable income (and payroll taxes) while remaining deductible for the employer, making it a relatively efficient workplace perk at a time when student debt averages over $39,000 per borrower. Still, there are limits and requirements: for one, the benefit cap hasn’t kept pace with the cost of living. Although tuition has grown faster than inflation, the annual benefit has never kept pace. If it had been adjusted for inflation, the benefit would now be worth $27,737.89 per year. While that kind of boost isn’t happening, the benefit will be indexed to inflation starting in 2027.Employers aren’t required to offer the benefit, but for those that do, it can be a meaningful tool for recruitment and retention—especially for workers looking to manage education costs or pay down student loans. If you’re not sure whether your employer offers a plan (I just checked our Forbes plan this month), be sure to ask HR. You might be leaving free money on the table. And speaking of education, I know that many of you are looking forward to all kinds of graduations from pre-k to grad school in the next week or two. As a first-gen college grad—and a mom of a college grad (and two more to go)—I know you have a lot to be proud of. Enjoy every minute.Until next week,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.QuestionsIn some states, you don't need a marriage license to be legally married.gettyThis week, a reader asks:I am married by common law in Texas, meaning we live together, we refer to each other as husband and wife in public, and we support children and share bank accounts. When filing, can I use “Married” as my marital status? It sure sounds like you’re married!For federal income tax purposes, your marital status is determined under state law as of the last day of the calendar year. It’s not more complicated than that. It doesn’t matter whether you got married on January 1 or December 30, and it doesn’t matter whether you separated in February or December. The IRS does recognize common law marriages—but only if they are valid under state law. That means if you live in a state (or country) that legally recognizes common law marriage, and you meet that jurisdiction’s requirements (such as intent to be married and holding yourselves out as spouses), the IRS will treat you as married for tax filing purposes. Currently, only a handful of states permit common-law marriages (Colorado, Iowa, Kansas, Montana, New Hampshire, South Carolina, Texas, and Utah), and the rules vary. If you’re not sure about the laws in your state, check with an attorney.It’s important to note that simply living together does not create a common law marriage for tax purposes. And despite popular rumor, there’s no specific number of years (like seven) of living together that automatically makes you common-law married.Once a common law marriage is established, you must file as Married Filing Jointly or Married Filing Separately in that tax year—you cannot file as single. This applies even if you later move to a state that does not recognize common law marriage.Statistics, Charts, and GraphsThe IRS has experienced sharp declines in both staffing and funding, with its workforce dropping from about 102,000 employees to 74,000 in 2025—a 27% reduction—and additional cuts on the table. The agency’s FY 2027 budget request would further reduce discretionary funding to $9.8 billion, down from $11.2 billion in FY 2026, while eliminating roughly 4,000 more positions. The proposed cuts are heavily concentrated in enforcement, where staffing could fall by nearly 30% from fiscal 2025 levels and by about 35% compared to earlier years, with reductions of approximately 4,794 full-time employees. At the same time, funding for enforcement and technology would each decline by about 18%, including a steep 63% drop in infrastructure spending, even as the IRS emphasizes modernization and data-driven compliance. The most recent IRS budget would shrink the agency again.Kelly Phillips ErbWhile taxpayer services would see a modest increase—about 1,072 additional positions (5%)—the broader reductions could significantly reshape IRS operations. The agency is expected to rely more on automated programs, despite historical data showing enforcement yields strong returns of roughly $11 to $13 for every $1 spent, raising concerns about the long-term impact on compliance and revenue collection. Taxes From A To Z: P is for Power of Attorney (Form 2848)Form 2848 is used to allow authorized representatives to communicate with the IRS on your behalf.gettyA Power of Attorney (POA) allows a taxpayer to designate another person—typically an attorney, CPA, or enrolled agent—to represent them before the IRS. This authorization is most commonly granted using Form 2848, which authorizes the representative to communicate directly with the IRS, receive confidential tax information, and act on the taxpayer’s behalf in specified matters. The scope is not unlimited—you must list the specific tax form numbers, years, and issues involved on the form.Practically speaking, a POA is important when a taxpayer is dealing with audits, collections, appeals, or other administrative proceedings, where having a tax professional involved makes sense. Once in place, the IRS will generally interact with the authorized representative instead of the taxpayer, which can be especially useful for managing deadlines, responding to notices, and negotiating resolutions. The IRS should also send notices and other communications to the representative (assuming the box is checked on the form), although this has been spotty of late. Certain actions—like signing a tax return—are restricted unless specifically permitted in the POA.It’s worth distinguishing a tax POA using Form 1040 from a broader legal power of attorney used in estate or financial planning. Form 2848 is purpose-built for federal tax matters and does not automatically extend to state tax agencies or non-tax legal authority. Taxpayers or tax professionals can revoke or modify a POA at any time, and the IRS maintains centralized authorization files (CAF) to track active authorizations, ensuring that only current, properly documented representatives have access to a taxpayer’s information.Tax TriviaWhen did Congress pass legislation creating the married filing jointly status nationwide?(A) 1913(B) 1918(C) 1929(D) 1948Find the answer at the bottom of this newsletter.Positions And GuidanceThe American Bar Association Section of Taxation submitted comments on the Department of Labor’s proposed regulation requiring pharmacy benefit managers and related providers to disclose compensation to the Employee Retirement Income Security Act (ERISA, a federal law that sets minimum standards for private employer-sponsored retirement and health plans) fiduciaries to enhance transparency. The comments support the proposal while offering recommendations on issues such as pricing practices, affiliate relationships, and the scope and timing of disclosures. NoteworthyDuring National Volunteer Week (April 19-25), the IRS honored thousands of volunteers who support their communities through the VITA and TCE programs by providing free tax preparation and guidance. Their efforts help millions of low- to moderate-income taxpayers file accurate returns, access valuable credits, and receive billions in refunds each year. The Taxpayer Advocacy Panel’s 2025 Annual Report highlights its work to improve IRS service, communication, and the taxpayer experience, including nearly 200 recommendations to strengthen tax administration. The report reflects extensive outreach to taxpayers and focuses on practical changes such as clearer notices, improved online tools, and more responsive customer service.Key Figures90%Kelly Phillips ErbThat’s the portion of gambling losses taxpayers would be allowed to deduct under proposed regulations implementing the One Big Beautiful Bill Act. Instead of fully offsetting gambling winnings, losses would be capped—meaning even a taxpayer with $100,000 in winnings and $100,000 in losses would still report $10,000 in taxable income, despite breaking even economically. This represents a notable shift from prior law, which permitted losses to offset gains dollar-for-dollar (but not beyond), ensuring taxpayers weren’t taxed on income they never actually realized. Critics argue the proposed regulations effectively tax gross gambling activity rather than true net income, a change that could disproportionately affect professional and high-volume gamblers whose large swings in wins and losses don’t necessarily reflect real profit.Trivia AnswerThe answer is (D) 1948.Married couples have long been able to file returns together, but not to split income.gettyMarried couples have had the option to file a joint return since 1913, but it was just a reporting convenience—a husband and wife could combine their income on a single return. It wasn't a distinct filing status, and couples couldn’t split income (that’s when a married couple combines their income and then divides it between them for tax rate purposes, rather than taxing each spouse’s income separately). In 1930, the Supreme Court ruled in Poe v. Seaborn that income splitting between spouses was legal, but only in the eight states with community property laws. This created a tax disparity, so other states started adopting similar laws to give their residents the same benefit. In 1948, Congress passed legislation creating joint filing status nationwide, making the community property issue moot.Worth A Second LookThe links, clips, and tax takes readers loved (and a few you may have missed):The Fascinating History Of How Income Taxes Got Americans Hooked On CocktailsWhat Happens If You Don’t Sign Your Tax Return—and How To Do It RightYou can find last week’s newsletter here.Tax Filing Deadlines📅 May 15, 2026. Deadline for calendar year tax-exempt organizations to file annual reports and returns, including Forms 990, 990-EZ, and 990-PF.📅 June 15, 2026. Due date for your 2026 Q2 estimated tax payment.📅 June 15, 2026. Last day for U.S. taxpayers living abroad to file without a further extension (payment was still due April 15).Tax Conferences And Events📅 May 5-6, 2026. National Association of Enrolled Agents Capitol Hill Fly-In. Washington, DC.📅 May 7-9, 2026. American Bar Association Section of Taxation May Tax Meeting. Marriott Marquis, Washington, DC.📅 June 2-5, 2026. National Association of Black Accountants Insight 2026: WIN (We Invest Now) Convention & Expo, Aria, Las Vegas, Nevada.📅 June 3-6, 2026. Tax Retreat—The Anticonference. San Antonio, Texas.📅 June 8-11, 2026. AICPA Engage. ARIA Resort & Casino, Las Vegas & live online.FeedbackWe’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.