Businesses that were turned down for ERC claims may have another option.gettyThere’s finally some good news for taxpayers who have been waiting to hear from the IRS. Years after the Employee Retention Credit (ERC) program ended, disputes over eligibility continue. Now, the IRS is allowing some taxpayers whose claims were denied to request an extension of time for review by the Independent Office of Appeals—offering a path to resolve cases without immediately resorting to costly litigation.This change comes amid a backlog of questionable and disallowed ERC claims, many flagged for potential fraud, and strict deadlines that previously forced taxpayers to consider filing lawsuits to preserve their rights. Eligible taxpayers—generally those who received denial letters and are nearing the two-year deadline before they can no longer receive a refund—can request additional time by submitting Form 907, provided both they and the IRS agree on an extension before the original deadline expires.But even as the IRS is offering some relief for taxpayers, new rules may add to the burden for some businesses. The Treasury Department and the IRS plan to revise Form 990 to enhance transparency and accountability for tax-exempt organizations, particularly around how funds are sourced, controlled, and used. While specific changes have not yet been released, the focus is expected to include greater scrutiny of fiscal sponsorship arrangements and more detailed reporting of government funding, reflecting concerns about oversight and potential misuse of funds.These updates could introduce new schedules, expanded disclosures, and more narrative reporting, but they also raise concerns about increased administrative burdens and potential impacts on smaller organizations. As the rulemaking process unfolds, the challenge will be balancing more oversight with practical compliance challenges for nonprofits already navigating complex reporting obligations.And there’s even more regulatory news in the non-profit sector. A case currently in federal court, Freedom Path Inc. v. IRS, highlights a growing conflict between tax law, First Amendment concerns, and congressional constraints. The issue in Freedom is how to define the limits of political activity for section 501(c)(4) social welfare organizations. With Congress effectively blocking the IRS and Treasury from updating guidance, the court has been placed in the unusual position of shaping the rules itself, particularly after finding existing standards potentially unconstitutionally vague. The outcome could significantly reshape how 501(c)(4) organizations engage in political campaigns, especially in a post-Citizens United landscape, where political spending has increased but regulatory clarity remains elusive.The changing regulatory landscape has also been felt among the Big Four. KPMG is restructuring parts of its U.S. business, including laying off about 4% of its advisory workforce, cutting roughly 10% of its U.S. audit partners, and winding down its federal audit practice as market conditions shift. The changes reflect declining demand in certain advisory areas—particularly regulatory consulting—alongside lower-than-expected attrition after pandemic-era hiring. The firm is also stepping back from federal audit work after the loss of a major U.S. Army contract, as the Department of Defense restructures its audit approach ahead of a 2028 deadline for a clean audit opinion (fun fact: in the last eight years, the Army has not received a clean audit). Despite the cuts, KPMG maintains that its overall business remains strong, with continued growth across audit, tax, and advisory services. Another common example is retirement and investment planning, which may include advising on Roth conversions or how to allocate assets across taxable and tax-advantaged accounts. It’s focused on making forward-looking decisions that shape the tax outcome. That’s especially important in retirement, since our Social Security system isn’t always fair.(Want to know more about Social Security benefits? Register for our members only webinar.)It’s clear that when it comes to tax, advice matters—it can improve outcomes, avoid mistakes, and create opportunities. But it can only take you so far. You still need to know the rules and know how to follow through. That’s what we aim to do with our Forbes tax newsletter—let us know how we can help. And with a nod to playoff season, may your advice be good—and your results keep advancing. 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.QuestionsA 1031 exchange will allow you to defer gain on an investment property.gettyThis week, a reader asks:Can you explain the tax implications of sale of a 1031 property? What is the cost basis? Is the base for tax purposes the original cost of the first property? Do upgrades to the original property affect the basis cost? How is depreciation handled? For example, if the original property was $100k and the next 1031 sold for $500k, what would the tax hit be if the property was sold considering $70k in depreciated deductions?A 1031 exchange (named after section 1031 of the tax code) is a tax mechanism that lets you defer capital gains taxes when you sell certain investment or business property and reinvest the proceeds into another “like-kind” property. Because a 1031 exchange allows you to defer taxes, those liabilities don't disappear. Instead, they impact your basis.Basis is, at its most simple, the cost that you pay for assets. The price is sometimes referred to as "cost basis" because you can make adjustments to basis over time. When you sell, that basis is subtracted from your sales price to determine your gain.When you swap Property A for Property B, you carry over the adjusted basis of Property A. Any capital improvements—like replacing a roof or upgrading HVAC—are added to your cost basis. General repairs—like painting or fixing a leaky faucet—might be helpful, but they do not affect the basis. Instead, they are treated as operating expenses.When you sell, the IRS wants back the tax breaks you took while you owned the property. That includes depreciation. During the exchange, the depreciation you took on Property A reduces its basis before it carries over to Property B. At sale, you are taxed on the total accumulated depreciation at a flat rate of 25%.Here’s how that works in your example. You started with a property at $100k, moved it into a 1031 exchange, and are now selling the final property for $500k with $70k in total depreciation taken over the years.If your original purchase price was $100,000, less total depreciation of $70,000, your adjusted basis is $30,000. A sales price of $500,000 would result in total taxable gain of $470,000.Your $470,000 gain is split into two buckets for the IRS. You recapture $70,000 of depreciation at a 25% tax rate($17,500) and pay capital gains tax on the $400,000 remainder at 15% or 20% ($60,000-$80,000), depending on your income and filing status . That’s a total federal tax hit of between $77,500 and $97,500. To avoid this tax hit indefinitely, taxpayers may use the “swap till you drop" strategy. That means continuing 1031 exchanges until death, at which point your heirs receive a "step-up” in basis to the current market value, effectively wiping out the deferred tax. It only applies to real estate held for investment or business use, so personal residences don’t count.Statistics, Charts, and GraphsHow high are property taxes in your state?Property taxes are often viewed as a burden on homeowners, but their role in housing affordability is more complex. While they increase the cost of owning a home, they also fund essential local services and infrastructure that can support higher household incomes and stronger local economies. Research suggests that cutting property taxes may provide short-term relief but can lead to longer-term economic drawbacks, including declines in median household income as reduced tax revenue impacts public services. At the same time, property taxes influence housing market dynamics and mobility. Higher taxes can encourage older homeowners to sell or downsize, freeing up housing for younger buyers, while lower taxes can create a “lock-in” effect that limits supply. Despite ongoing debates and rising costs, property taxes remain a critical—and difficult to replace—source of local government funding, shaping both community well-being and broader housing outcomes.Taxes From A To Z: Q Is For Qualified Charitable DistributionA QCD is a way to donate to charity and have the funds count towards your RMD.gettyA qualified charitable distribution (QCD) allows donors age 70½ and older who own a traditional IRA to roll funds directly from an IRA to a qualified charity. The recipient must be a qualified public charity—donor-advised funds, private foundations, and supporting organizations do not qualify. Instead of taking a distribution into income and then claiming a charitable deduction, the QCD amount is excluded from gross income altogether. That means that the QCD amount won’t be factored into your adjusted gross income (AGI) which can lower your exposure to phaseouts, Medicare premium surcharges (IRMAA), and taxation of Social Security benefits. The total amount that you can exclude from your gross income increased to $111,000 in 2026.QCD amounts can be used to satisfy your required minimum distributions (RMDs) for the year, but without increasing taxable income. This makes QCDs particularly attractive for retirees who do not need their full RMD for living expenses and would otherwise face higher taxable income. Additionally, as part of SECURE 2.0, you can make a one-time election to donate a QCD to a split-interest entity like a charitable trust. The initial limit was $50,000, but it is adjusted for inflation to $55,000 in 2026. Combining a QCD with a split-interest entity can provide multiple benefits, including a tax break for you as the donor and a stream of predictable income for non-charitable beneficiaries (like spouses or children).Tax TriviaThe biggest firms in the accounting industry were previously referred to as the “Big Five” beginning in 1998. Which firm was dropped from the list in 2002? (A) Arthur Andersen (B) Coopers & Lybrand (C) Haskins & Sells (D) Peat Marwick MitchellFind the answer at the bottom of this newsletter.Positions And GuidanceThe IRS issued temporary regulations outlining how taxpayers can claim refunds of excise tax on previously taxed fuel later converted to dyed fuel for nontaxable use, effective immediately with eligibility limited to the original taxpayer who paid the tax.NoteworthyThe IRS is accepting applications from May 1–31, 2026, for Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) grants, which provide up to three years of funding to eligible organizations offering free tax preparation services, with $12 million and $41 million awarded to the programs respectively in 2026.An April poll from the National Association of Tax Professionals (NATP) found that many tax returns took longer to complete this year primarily due to missing, delayed, or incomplete documentation rather than complex tax issues, with last-minute submissions and information gaps requiring additional follow-up before filing. Timing and coordination—not tax law changes—were the main drivers of delays.Key FiguresNineKelly Phillips ErbThat’s the number of months of the year that, if you’re present in California, you’re presumed to be a resident.Avoiding California taxes is no longer as simple as using out-of-state trusts; instead, residency—and thus tax liability—is determined based on domicile and a range of objective factors like physical presence, family location, and financial ties.While moving out of California can still reduce tax exposure, the state closely scrutinizes such moves, applying detailed residency rules and presumptions—like spending more than nine months in-state—to assess whether a taxpayer has truly established residency elsewhere.Trivia AnswerThe answer is (A) Arthur Andersen.Arthur Andersen was formerly one of the "Big Five" accounting firms. (Photo by Tim Boyle/Getty Images)Getty ImagesStarting in the late 1980s and 1990s, consolidation reshaped the industry: Ernst & Ernst merged with Arthur Young to form Ernst & Young, Deloitte Haskins & Sells merged with Touche Ross to form Deloitte & Touche, and Price Waterhouse merged with Coopers & Lybrand to form PwC. Peat Marwick had already combined internationally in 1987 to form KPMG.These deals reduced the Big Eight to the Big Five—until Arthur Andersen collapsed in 2002 after the Enron scandal, leaving today’s Big Four: Deloitte, EY, PwC, and KPMG.Worth A Second LookThe links, clips, and tax takes readers loved (and a few you may have missed):Surprise: You May Be Owed An IRS Refund For Payments Made During The PandemicIRS Enforcement Takes Another Big Hit As Budget Request Shrinks You 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.