February 12th, 2026
January Federal Tax Update
Posted in: Tax Law Tagged: David S. De Jong
Author: David S. De Jong
INDIVIDUALS
In Algarawi v. Commissioner, TC Memo 2026-8, the Tax Court agreed with IRS that a tax
preparer had to report as income amounts left in cash by impoverished individuals who were
allowed to make a charitable donation in lieu of payment for services; however, the cash
payments went in the preparer’s account and there was no indication that they were ever paid
over to a charitable organization.
In Gibson v. Commissioner, TC Summary Opinion 2026-1, the Tax Court denied a charitable
deduction of over $188,000 in cycling apparel allegedly received as a gift by the donors who
made an inadequate explanation to the Court; the taxpayers also failed to attach a copy of the
appraisal to the tax return and could not show that the appraiser had the required qualifications.
Assistant Treasury Secretary for Tax Policy, Kenneth Kies, indicated that IRS will renew prior
settlement offers on conservation easements to reduce the 1,100 cases that are pending.
RETIREMENT AND ESTATE PLANNING
In Notice 2026-9, IRS extended the deadline for IRAs and SEPs to implement plan amendments
mandated by SECURE 2.0 until December 31, 2027.
BUSINESS
In Sirius Sols v. Commissioner, 137 AFTR2d 2026 –, a divided Fifth Circuit Court of Appeals panel reversed the Tax Court and held that it erred in looking beyond the legal status of limited partners by determining that they were acting as general partners; the Court concluded that any flow through income of a limited partner is necessarily not subject to self-employment tax. In United States v. Neuberger, 137 AFTR2d 2026 – , a Maryland Federal District Court
concluded that the attorney for a bankrupt business was liable for a corporation’s unpaid taxes to
the extent of the value of the asset distributed to equity holders before payment of tax obligations
known to him where he played an integral role in the development, oversight and execution of a
plan to pay other creditors first.
PROCEDURE
In Levin v. Internal Revenue Service, 137 AFTR 2d 2026 – , an Alabama Federal District Court denied a lawyer’s request for documents under the Freedom of Information Act as to how IRS employees review and assess Employee Retention Credit claims as disclosure would have helped taxpayers circumvent and evade the law. In United States v. Reyes, 137 AFTR2d 2026 –, the Second Circuit Court of Appeals agreed with a New York Federal District Court and the preponderance of the appellate courts that “willfulness” includes both intentional and reckless conduct in the case of a couple who failed to file the FBAR form where they paid the bank an extra fee not to send mail to their US address
and used a friend in Spain as an intermediary.
In Gilbert v. Commissioner, TC Memo 2026- , the Tax Court, bound by a Third Circuit Court of Appeals decision allowing a Tax Court petition beyond 90 days for good cause, allowed a taxpayer who claimed not to have received actual notice of the statutory Notice of Deficiency to move forward with a trial on the merits. In United States v. Willis, 137AFTR 2d 2026- , a Texas Federal District Court permitted IRS to foreclose on the principal residence of a Houston businessman who owed almost $6.5 million in unpaid taxes.
In Walker v. Commissioner, TC Memo 2026-4, the Tax Court in an appeal from a Collection
Due Process (CDP) determination threw out a proposed levy and held that an assessment
resulting from failure to include the required forms related to advanced premium tax credit
payments was not correction of a math error and required a Notice of Deficiency.
In Zaheen v. Commissioner, TC Memo 2026-7, the Tax Court granted Innocent Spouse Status to
a physician who met her husband one day before their marriage, finding that he was physically,
emotionally and economically abusive while managing her practice.
In Information Release 2026-9, IRS confirmed that one-time supplemental allowances for
housing payments made to military service members of $1,776 in December are not taxable as a
“qualified military benefit” similar to the basic allowance for housing payments.
