Summer Tax Updates

As things continue to heat up this summer, here are a few recent developments and reminders that may be of interest to you

The IRS is implementing a change in their process for potential penalty relief

Prior Method - First Time Abatement (FTA)

• Taxpayer had to request a waiver and had to prove reasonable cause
• Relief required a "3 year qualification" rule
• Taxpayer had to file and pay on time for the last three years
• Taxpayer could not have already received an abatement in those 3 years
• FTA will phase out by the end 2026

New Method - Automatic Exemption from Penalty (AEP)

• Taxpayer does not have to request relief and there is no reasonable cause requirement
• Same 3 year qualification rule as above
• Taxpayer will automatically receive penalty exemption but only once in the 3 year window
• AEP only applies to certain types of penalties (late filing, late payment) and does not eliminate the underlying tax or interest owed
• AEP goes into effect on for return due starting Jan 1st, 2027.

Under the new AEP program, it is estimated 1.5M taxpayers would have qualified for penalty relief in 2025 compared to the 220K that actually received relief under the prior FTA program.

For those with eligible children under 18 that elected to do so, the Trump accounts officially opened on July 4th, 2026. Refer to our prior newsletters on this topic but here are a few updates

• Bank of New York (BNY) is the official fiduciary for all Trump Accounts
• BNY has partnered with Robinhood for the app that can be used to manage the Trump accounts
• If you did not elect to open a Trump account when we filed the 2025 tax return, you can still open an account on-line.
• Go to Trumpaccount.gov for more information or use the link below.

The IRS released some "final" stats on the 2025 filing season:

• The IRS processed 143.9M tax returns in 2026 which was up about 1% from 2025.
• The IRS had 28% less staff than prior year primarily due to DOGE and other budget cuts.
• While it is commendable the IRS was able to process similar volumes with a major new tax law in effect, the reduced staffing levels negatively impacted call hold times and processing of amended returns and potential identify theft issues.

The IRS has indicated they will place extra scrutiny on non-cash charitable contributions. As part of this, if non cash contributions exceed $5,000, you must submit a qualified appraisal (prepared and signed by the charitable organization). We must include the appraisal data with form 8283 that is submitted with the tax return to the IRS.

As a result of recent gas price increases, the IRS has implemented a mid-year increase in the standard mileage allowance. As of July 1st, 2026, the standard IRS mileage allowance is 76 cents per mile compared to the 72.5 cents per mile that was in effect as of January 1st, 2026.

We are enjoying the summer and a slower pace compared to our busy tax season. As a result, if you are going to stop by our office, it is best to do so Monday through Thursday (between 9am and 3pm). Also, it is best to schedule an appointment to make sure the person you need will be available. If you do miss us, feel free to use the secure drop box located outside our office door.

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