Welcome to the first issue of Taxing Matters. Stellar Wealth Management LLC is now a state-registered investment adviser in Alaska (CRD 342926). That means we can offer financial planning and non-discretionary investment advice in addition to the tax practice.
The Alaska registration follows the personal news. We PCS'd and moved north this spring. Same client focus (federal firefighters, military, federal employees, small business owners), now from Alaska.
The lead: TSP loans, explained
First in a multi-part series on the TSP loan. What it is, the math against other borrowing options, what happens at separation, and the narrow set of situations where a loan actually beats the alternatives.
Watch the blog at stellarwm.com/articles.html for the first post in the series.
By the numbers: refunds up 11%, 45% claimed a new deduction
Per the IRS 2025 Data Book released June 5, average refunds rose 11.1% ($3,273 in 2026 versus $2,947 in 2025), and roughly 45% of individual returns claimed at least one of the new Working Families Tax Cuts Act deductions: no tax on tips, no tax on overtime, no tax on car loan interest, or the enhanced senior deduction.
A bigger refund feels good but usually means you are overpaying through withholding all year. Current tax clients, reach out if you want help adjusting your W-4. Not a service we offer to non-clients.
IRS letter volume is up. And 44% are incorrect.
Three sources point in the same direction. IRS CEO Frank Bisignano told the Senate Finance Committee the agency is "modernizing enforcement through expanded use of artificial intelligence, advanced analytics, and improved data integration," which means more automated notices going out.
TIGTA found that nearly 44% of Automated Underreporter notices are incorrect due to outdated cross-checking. And the National Taxpayer Advocate's 2026 Annual Report flagged a 6.3 million correspondence backlog at the end of FY2025 alongside workforce cuts, meaning responses take longer to resolve.
If you receive an IRS letter, current tax clients can forward it through TaxDome and we will talk about the response. Not a service we offer to non-clients.
Can OPM fire a federal employee for filing taxes late?
On June 30, OPM finalized a new Suitability and Fitness rule, effective July 30. The list of potentially disqualifying post-hire misconduct includes failure to timely file federal tax returns. OPM said the standard is deliberate or reckless conduct, not honest mistakes: an employee who misses a deadline because of a job loss or medical emergency would be evaluated differently than one who refuses to comply. The Merit Systems Protection Board had closed off post-hire suitability actions in 2011, so the authority is new and has not been tested. GovExec has the enforcement mechanics.
For context on how narrow the target pool actually is: the IRS's most recent tax gap study (Publication 5869, tax year 2022) puts the voluntary compliance rate at 85%, and nonfiling accounts for only about 9% of the estimated $696 billion tax gap. The rule sounds like a lot of bark; in practice it likely results in few if any firings.
Filed on time for three years? IRS won't penalize you anymore.
Quietly, the IRS launched Automatic Exemption from Penalty (AEP) this month, replacing First Time Abate. If you have filed and paid on time for the three prior years, the IRS will not assess failure-to-file, failure-to-pay, or failure-to-deposit penalties on the next return. No request needed, no letter, no phone call, applied systemically. It covers Forms 1040, 1065, 1120, 940 through 945, and CT-1. AEP fully replaces First Time Abate for returns due on or after January 1, 2027. The National Taxpayer Advocate has the mechanics. This is a genuine taxpayer win.
ACA premium tax credit still expired, no extension in sight
The enhanced §36B premium tax credit expired January 1, 2026, and the Senate has not moved an extension. Marketplace premiums are up about 114% on average. The people this hits: transitioning servicemembers between active-duty coverage and civilian employment, federal firefighters in gap coverage, S-corp owners on marketplace plans, and small business owners generally. If you have been sitting on a coverage decision assuming the credit would come back, that is now an assumption worth testing rather than planning around.
Trump Accounts (§530A): the gift-tax rules landed
On June 29, the IRS released Rev. Proc. 2026-25. Contributions to a §530A Trump Account qualify as completed present-interest gifts eligible for the annual exclusion. Grandparents, aunts, uncles, and family friends can fund a child's account without filing Form 709 and without touching their lifetime exemption, as long as the safe-harbor conditions are met. This was the largest open question from the March proposed regulations, and it landed on the taxpayer-friendly side.
The caveat is state treatment. Trump Accounts are a federal creation and states are treating them differently. Research how your state treats these accounts before you fund one.
There is a bigger question inside the mechanics. Sen. Ted Cruz, who authored the §530A provision, told the Milken Institute the accounts are designed to build public support for eventually redirecting Social Security payroll taxes into personal accounts. His phrase for the strategy: "start at the cradle." Treasury Secretary Scott Bessent called the same idea a "backdoor" to privatizing Social Security. Labor economist Teresa Ghilarducci, who has worked on universal-account design with National Economic Council Director Kevin Hassett, says the privatization framing is not what she has heard from anyone inside the process. Kiplinger and TheStreet both have more.
Contributions opened July 4 as scheduled. My primer on the basics is at stellarwm.com/trump-accounts-for-kids.html. Two from the Wall Street Journal are still worth reading: the unanswered questions parents need to know, and the super-funding hack that turns them into multi-million-dollar tax-free nest eggs for families that fully fund the account.
ROAD to Housing Act: applause for intent
On July 11, the 21st Century ROAD to Housing Act became law. It includes restrictions on additional single-family home purchases by large institutional investors, which chases a small target. Institutional holdings are about 0.35% of the total housing stock, and small landlords own roughly 85% of all investor-owned residential properties.
The bill also includes real supply-side provisions: zoning reform, transit-oriented development, single-stairway buildings up to six stories, and higher FHA multifamily loan limits. Those attempt to address a supply side that has been neglected for a long time. But do not read this as a supply increase that will outpace demand and drive prices down. That is the classic supply-demand tension at play, and this bill will not resolve it. Redfin's chief economist Daryl Fairweather said the bill "will boost the nation's housing supply, but it will take time," and that is the mainstream read. If anything, it may slow appreciation. Skeptical at best.
Quick hits
TSP is launching an L 2070 fund on July 26. First new lifecycle fund since L 2065 came out four years ago, per FedWeek. Ninety-nine percent equity split, aimed at participants born after 2004 — new enlistees, essentially. L 2075 follows in 2027.
2027 COLA is tracking 3.6% to 3.8%. Based on the June CPI-W print of 327.075 (+3.5% year over year), the July/August/September average will set the 2027 COLA used by VA disability, SBP, and other retiree benefits. Final number in mid-October, adjustments effective December 1.
OPM raised the federal uniform allowance cap from $800 to $1,500, effective July 13. First increase since 2007. For federal firefighters and other feds required to wear a uniform on duty, this was long overdue: the $800 cap had been eaten by 57% cumulative inflation since it was last set.
IRS revised the standard mileage rates mid-year (Announcement 2026-11), effective July 1: business at 76¢ per mile, medical and moving at 23.5¢ per mile. Matters for anyone tracking mileage: side gigs, S-corp reimbursements, PCS moves, Schedule C.
Commentary: inflation, wages, and the Fed
June CPI came in at 3.5% year over year per the BLS release, down from 4.2% in May. Most of the drop was energy unwinding (twelve-month energy moderated to +15.7% from +23.5% as the post-Iran spike reversed). Core CPI eased to 2.6% from 2.9%. Headline is still what shows up on a fixed-income retiree's grocery bill.
For federal civilians
The 2026 raise came in at 1% by executive order, with an extra 2.8% for some law enforcement to match the military. With CPI at 3.5%, federal civilians are still losing purchasing power on the year.
The FY2027 outlook is worse. Trump's FY2027 budget proposes a pay freeze for federal civilians, and House appropriations advanced the FY2027 spending bill without a raise. Democrats reintroduced the FAIR Act for a 4.1% raise (3.1% base plus 1% locality), but the bill has not advanced in a decade of annual reintroductions.
Nothing has actually moved. No House floor vote on the FY2027 Financial Services and General Government appropriation, no Senate mark, no FAIR Act hearing. The next real trigger is the statutory deadline for Trump's alternative pay plan letter to Congress, due August 31. Worth watching whether he overrides his own freeze the way he did for 2026.
For military
The 2026 raise (uniform 3.8% plus 4.2% BAH average) is settled. The FY27 fight is now tiered vs. flat, and neither chamber has passed a bill. The House Armed Services markup keeps the tiered raises (7% for E-5 and below, 6% for E-6 through O-3, 5% for O-4 and above), plus the BAH exclusion from the Basic Needs Allowance income calc. The Senate mark rejects it and substitutes a flat 3.6% for everyone. Both chambers are procedurally stuck: the House rule failed on June 30 (13 GOP defectors), a second rule passed 215-211 on July 14, and Senate cloture failed 50-46 the same day. Nothing moves until one side concedes.
A few things did not move that are worth naming. No out-of-cycle BAH or BAS adjustments; 2026 rates hold through December 31. No new CZTE zones designated (Yemen/Red Sea, Southern Command and Venezuela area are still outside CZTE despite ongoing activity). If you deployed and were counting on the exclusion, verify your orders name a currently-designated combat zone before you plan around it.
The Federal Reserve
Kevin Warsh was sworn in as Fed Chair on May 22. His first FOMC meeting is June 16 to 17. With headline CPI at 4.2%, the odds of a rate hike are climbing in the prediction markets. Kalshi rate-hike odds moved from below 40% a month ago to over 50% this week. Worth watching what Warsh signals on the first dot plot.
One thing to feel good about
The 2026 World Cup wrapped in the US this month. Joshua Robinson and Jonathan Clegg wrote a WSJ piece calling the tournament "an eye-opening affirmation of American soft power." Their point: despite the US team's early exit and the political noise, the rest of the world showed up and had a good time. If the feed's been telling you the country is coming apart, worth a read as a reminder that America is still a pretty great place.
One more thing
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