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Contributions to Trump accounts will be treated as completed gifts that are not future interests in property and the gift tax annual exclusion amount will apply under a safe harbor for certain donors making contributions to Trump accounts created under Code Sec. 530A.

Contributions to Trump accounts will be treated as completed gifts that are not future interests in property and the gift tax annual exclusion amount will apply under a safe harbor for certain donors making contributions to Trump accounts created under Code Sec. 530A.

Pursuant to the rules of Code Sec. 530A, distributions from Trump accounts are limited during the growth period, which is the period ending on January 1 of the year in which the account beneficiary attains age 18. During the growth period, annual contributions are limited to $5,000 per year, as adjusted for inflation after 2027. Gifts of future interests in property are not eligible for the annual gift tax exclusion and must be reported on a federal gift tax return.

The safe harbor applies for a particular year if the following requirements of section 4.02 are met:

• The taxpayer is an individual;
• The only taxable gifts made by the taxpayer during the calendar year are cash contributions to one or more Trump accounts, each made before the calendar year in which the account beneficiary attains age 18;
• The taxpayer's total gifts during the calendar year to each individual who is an account beneficiary, including contributions to that individual beneficiary's Trump account, do not exceed the Code Sec. 2503(b) annual exclusion;
• Such contributions to Trump accounts during the calendar year do not generate for that year either a gift or generation-skipping transfer (GST) tax liability after application of the taxpayer's remaining applicable credit amount against the gift tax or remaining GST exemption; and
• Disregarding the Trump account contributions described in section 4.02(2) of the revenue procedure, a gift tax return is not required to be filed, and no gift tax return is otherwise filed for that calendar year by or on behalf of the taxpayer for any other purposes.

If these requirements are satisfied, each Trump account contribution made by the taxpayer during the calendar year will be treated as a completed gift to the account beneficiary that is not a future interest in property and to which the annual exclusion applies for purposes of gift and GST tax reporting. As a result, taxpayers within the scope of the safe harbor will not be required to file a gift tax return reporting the such contributions.

Rev. Proc. 2026-25

IR 2026-80

The IRS has issued final regulations identifying certain Charitable Remainder Annuity Trust (CRAT) transactions and substantially similar transactions as listed transactions subject to the reportable transaction disclosure rules. The regulations require participants and material advisors to disclose these transactions to the IRS while clarifying that charitable organizations whose only interest is as charitable remaindermen are not treated as participants or parties to prohibited tax shelter transactions. The regulations are effective July 9, 2026.

The IRS has issued final regulations identifying certain Charitable Remainder Annuity Trust (CRAT) transactions and substantially similar transactions as listed transactions subject to the reportable transaction disclosure rules. The regulations require participants and material advisors to disclose these transactions to the IRS while clarifying that charitable organizations whose only interest is as charitable remaindermen are not treated as participants or parties to prohibited tax shelter transactions. The regulations are effective July 9, 2026.

Under Code Secs. 6011 and 6707A, the IRS may identify transactions with tax avoidance potential as listed transactions. The final regulations add Reg. §1.6011-15, identifying transactions in which appreciated property is contributed to a purported CRAT, sold by the trust, and the sale proceeds are used to purchase an annuity, with the beneficiary improperly treating the annuity payments under Code Sec. 72 instead of applying the distribution ordering rules of Code Sec. 664(b).

Although participants and material advisors remain subject to the applicable disclosure requirements, organizations described in Code Sec. 170(c) that merely receive the charitable remainder interest are excluded from participant status and are not treated as parties to prohibited tax shelter transactions under Code Sec. 4965 solely because of that interest. The IRS finalized the regulations without substantive changes from the proposed regulations issued in 2024.

T.D. 10051

IR 2026-82

A portion of litigation settlement proceeds consisting of attorney’s fees and costs was includible in the gross income of two individuals (taxpayers). Said portion was not deductible under Code Sec. 62(a)(20). The Fair Credit Reporting Act’s (FCRA) (P.L. 91-508) fee-shifting provisions were inapplicable in this case.

A portion of litigation settlement proceeds consisting of attorney’s fees and costs was includible in the gross income of two individuals (taxpayers). Said portion was not deductible under Code Sec. 62(a)(20). The Fair Credit Reporting Act’s (FCRA) (P.L. 91-508) fee-shifting provisions were inapplicable in this case.

Background

The taxpayers sued multiple credit reporting agencies under FCRA provisions. They eventually settled with each agency. In all relevant Forms 1099–MISC the settlement amounts were reflected without the attorney’s fees and costs.

Civil Rights Interpretation for FCRA Claims Denied

The taxpayers’ FCRA claims of unlawful discrimination did not fall under Code Sec. 62(e)(18)(i). Said claims were based on fair and accurate credit reporting and not consumer privacy. Particularly, the taxpayers’ concerns did not fall under “highly sensitive” and “intimate personal information” categories.

J.W. Eiler, 167 T.C. No. 3, Dec. 62,865

The IRS has reminded taxpayers that major life events can affect tax filing requirements, eligibility for tax benefits and the amount of tax withheld from paychecks. The agency explained that changes such as marriage, the birth or adoption of a child, divorce or the death of a loved one may require updates to tax information and a review of filing status.

The IRS has reminded taxpayers that major life events can affect tax filing requirements, eligibility for tax benefits and the amount of tax withheld from paychecks. The agency explained that changes such as marriage, the birth or adoption of a child, divorce or the death of a loved one may require updates to tax information and a review of filing status. A name change following marriage should be reported to the Social Security Administration so the updated name matches Social Security records. An address change should be reported to the IRS by filing Form 8822, Change of Address, and employers, financial institutions and the U.S. Postal Service should also be notified. Marriage may also require submission of a new Form W-4, Employee's Withholding Certificate, to ensure the correct amount of tax is withheld.

Additionally, the IRS noted that the birth or adoption of a child may make a taxpayer eligible for valuable tax benefits, including the Child Tax Credit, Adoption Credit and Child and Dependent Care Credit, if applicable requirements are satisfied. Divorce or the death of a spouse may also affect filing status, tax withholding and eligibility for certain tax benefits. The IRS encouraged prompt updates to tax records, careful evaluation of changes affecting tax obligations and use of available IRS resources to better understand the tax consequences of major life events. Early action can help avoid filing issues, support accurate tax reporting, maximize available tax benefits and improve preparation for the next tax filing season.

IRS Tax Tip 2026-55

The Internal Revenue Service received and processed less returns during 2026, according to the Treasury Inspector General for Tax Administration.

The Internal Revenue Service received and processed less returns during 2026, according to the Treasury Inspector General for Tax Administration.

In a recently released report, TIGTA stated that from March 1, 2025, through February 28, 2026, the IRS received 51.5 million tax returns, down from 52. 4 million in the previous year, though it did see a significant drop in paper returns received from 1.2 million in 2025 to 618,000 in 2026. Of the returns received in 2026, the agency processed 50.9 million returns, down from 51.8 million.

From the beginning of the 2026 tax filing season to the end of February 2026, TIGTA reported that the inventory backlog in key tax return processing programs increased from 1.9 million to 2.4 million. Additionally, nearly 75 percent of the amended return inventory is over-aged during the 2026 tax filing season.

“Generally, inventories increase during the filing season as the IRS balances efforts to answer phone calls and reduce inventories,” TIGTA stated in the report. “However, with the reduction in staff, increases in key inventories could become a concern.”

The number of refunds dipped to 36.5 million from 36.9 million, although there was a $360 increase in the average refund from $3,382 in 2025 to $3,742.

TIGTA also reported that the IRS did not meet its hiring goals for the 2026 tax filing season. The agency had been approved to hire 1,900 employees for submission processing (these workers process original and amended returns and resolve tax return errors) but only onboarded 800 individuals. Likewise, it was approved to hire 3,500 account management employees (handlers of taxpayer contacts through telephone and mail and process adjustments) but brought 2,300 on board.

Submission processing management said it would be onboarding new hires throughout the tax season, while account management leadership had no plans to hire new employees and would only be onboarding those who previously received offers but had delays in the hiring process.

In a positive from the 2026 season, TIGTA reported that the new and modified “e-file business rules associated with the child tax Credit, state and local tax deduction, and adoption credit are working as intended.”

Taxpayer Assistance Centers offered incorrect tax guidance during nearly half of unannounced visits by Treasury Inspector General for Tax Administration staff.

Taxpayer Assistance Centers offered incorrect tax guidance during nearly half of unannounced visits by Treasury Inspector General for Tax Administration staff.

According to a recent TIGTA report, during the 2025 tax filing season, the Treasury watchdog made 91 unannounced visits to TACs nationwide at various time (regular and extended hours), at the 61 visits where TIGTA staff did receive assistance, “TAC employees did not provide the correct tax law guidance during 28 of those visits (46 percent).”

TAC employees were presented with questions across one of the three areas – injured spouse, selling your main home, and American Opportunity Tax Credit. The report notes that for questions related to tax law topics, “TAC employees must use the Interactive Tax Law Assistant ITLA) tool to respond to taxpayers. The ITLA tool asks a series of questions, then generates accurate and complete responses based on the taxpayer’s situation. The tool is designed for TAC employees and is intended to improve operational performance in the areas of quality, efficiency, customers satisfaction, and employee satisfaction.”

TIGTA noted that during the 2025 filing season, “managers counseled several TAC employees for not using the ITLA tool during taxpayer interactions. During our site visits, we also observed that TAC employees did not always the ITLA tool to answer our tax law questions.”

Additionally, of those 91 visits, TIGTA “did not receive full assistance during 30 of our 91 visits due to incomplete or inaccurate responses to tax law questions, denial of entry by security or unexpected TAC closures.”

These days, both individuals and businesses buy goods, services, even food on-line. Credit card payments and other bills are paid over the internet, from the comfort of one's home or office and without any trip to the mailbox or post office.

Now, what is probably your biggest "bill" can be paid on-line: your federal income taxes.

There are three online federal tax payment options available for both businesses and individuals: electronic funds withdrawal, credit card payments and the Electronic Federal Tax Payment System. If you are not doing so already, you should certainly consider the convenience -and safety-- of paying your tax bill online.  While all the options are now "mainstream" and have been used for at least several years, safe and convenient, each has its own benefits as well as possible drawbacks. The pros and cons of each payment option should be weighed in light of your needs and preferences.

Electronic Funds Withdrawal

Electronic funds withdrawal (or EFW) is available only to taxpayers who e-file their returns. EFW is available whether you e-file on your own, or with the help of a tax professional or software such as TurboTax. E-filing and e-paying through EFW eliminates the need to send in associated paper forms.

Through EFW, you schedule when a tax payment is to be directly withdrawn from your bank account. The EFW option allows you to e-file early and, at the same time, schedule a tax payment in the future. The ability to schedule payment for a specific day is an important feature since you decide when the payment is taken out of your account. You can even schedule a payment right up to your particular filing deadline.

The following are some of the tax liabilities you can pay with EFW:

• Individual income tax returns (Form 1040)
• Trust and estate income tax returns (Form 1041)
• Partnership income tax returns (Forms 1065 and 1065-B)
• Corporation income tax returns for Schedule K-1 (Forms 1120, 1120S, and 1120POL)
• Estimated tax for individuals (Form 1040)
• Unemployment taxes (Form 940)
• Quarterly employment taxes (Form 941)
• Employers annual federal tax return (Form 944)
• Private foundation returns (Form 990-PF)
• Heavy highway vehicle use returns (Form 2290)
• Quarterly federal excise tax returns (Form 720)

For a return filed after the filing deadline, the payment is effective on the filing date. However, electronic funds withdrawals can not be initiated after the tax return or Form 1040 is filed with the IRS. Moreover, a scheduled payment can be canceled up until two days before the payment.

EFW does not allow you to make payments greater than the balance you owe on your return. Therefore, you can't pay any penalty or interest due through EFW and would need to choose another option for these types of payments. While a payment can be cancelled up to two business days before the scheduled payment date, once your e-filed return is accepted by the IRS, your scheduled payment date cannot be changed. Thus, if you need to change the date of the payment, you have to cancel the original payment transaction and chose another payment method. Importantly, if your financial institution can't process your payment, such as if there are insufficient funds, you are responsible for making the payment, including potential penalties and interest. Finally, while EFW is a free service provided by the Treasury, your financial institution most likely charges a "convenience fee."

Credit Card Payments

Do you have your card ready? The Treasury Department is now accepting American Express, Discover, MasterCard, and VISA.

Both businesses and individual taxpayers can make tax payments with a credit card, whether they file a paper return or e-file. A credit card payment can be made by phone, when e-filing with tax software or a professional tax preparer, or with an on-line service provider authorized by the IRS. Some tax software developers offer integrated e-file and e-pay options for taxpayers who e-file their return and want to use a credit card to pay a balance due.

However, there is a convenience fee charged by service providers. While fees vary by service provider, they are typically based on the amount of your tax payment or a flat fee per transaction. For example, you owe $2,500 in taxes and your service provider charges a 2.49% convenience fee. The total fee to the service provider will be $62.25. Generally, the minimum convenience fee is $1.00 and they can rise to as much as 3.93% of your payment.

The following are some tax payments that can be made with a credit card:

• Individual income tax returns (Form 1040)
• Estimated income taxes for individuals (Form 1040-ES)
• Unemployment taxes (Form 940)
• Quarterly employment taxes (Form 941)
• Employers annual federal tax returns (Form 944)
• Corporate income tax returns (Form 1120)
• S-corporation returns (Form 1120S)
• Extension for corporate returns (Form 7004)
• Income tax returns for private foundations (Form 990-PF)

However, as is the case is with the EFW option, if a service provider fails to forward your payment to the Treasury, you are responsible for the missed payment, including potential penalties and interest.

Electronic Federal Tax Payment System

EFTPS is a system that allows individuals and businesses to pay all their federal taxes electronically, including income, employment, estimated, and excise taxes. EFTPS is available to both individuals and businesses and, once enrolled, taxpayers can use the system to pay their taxes 24 hours a day, seven days a week, year round. Businesses can schedule payments 120 days in advance while individuals can schedule payments 365 days in advance. With EFTPS, you indicate the date on which funds are to be moved from your account to pay your taxes. You can also change or cancel a payment up to 2 business days in advance of the scheduled payment date.

EFTPS is an ideal payment option for taxpayers who make monthly installment agreement payments or quarterly 1040ES estimated payments. Businesses should also consider using EFTPS to make payments that their third-party provider is not making for them.

EFTPS is a free tax payment system provided by the Treasury Department that allows you to make all your tax payments on-line or by phone. You must enroll in EFTPS, however, but the process is simple.

We would be happy to discuss these payment options and which may best suit your individual or business needs. Please call our office learn more about your on-line federal tax payment options.

In order to be tax deductible, compensation must be a reasonable payment for services. Smaller companies, whose employees frequently hold significant ownership interests, are particularly vulnerable to IRS attack on their compensation deductions.

In order to be tax deductible, compensation must be a reasonable payment for services. Smaller companies, whose employees frequently hold significant ownership interests, are particularly vulnerable to IRS attack on their compensation deductions.

Reasonable compensation is generally defined as the amount that would ordinarily be paid for like services by like enterprises under like circumstances. This broad definition is supplemented, for purposes of determining whether compensation is deductible as an ordinary and necessary expense, by a number of more specific factors expressed in varying forms by the IRS, the Tax Court and the Circuit Courts of Appeal, and generally relating to the type and extent of services provided, the financial concerns of the company, and the nature of the relationship between the employee and the employer.

Why IRS Is Interested

A chief concern behind the IRS's keen interest in what a company calls "compensation" is the possibility that what is being labeled compensation is in fact a constructive dividend. If employees with ownership interests are being paid excessive amounts by the company, the IRS may challenge compensation deductions on the grounds that what is being called deductible compensation is, in fact, a nondeductible dividend.

Another area of concern for the IRS is the payment of personal expenses of an employee that are disguised as businesses expenses. There, the business is trying to obtain a business expense deduction without the offsetting tax paid by the employee in recognizing income. In such cases, a business and its owners can end up with a triple loss after an IRS audit: taxable income to the individual, no deduction to the business and a tax penalty due from both parties.

Factors Examined

The factors most often examined by the IRS in deciding whether payments are reasonable compensation for services or are, instead, disguised dividend payments, include:

1. The salary history of the individual employee
2. Compensation paid by comparable employers to comparable employees
3. The salary history of other employees of the company
4. Special employee expertise or efforts
5. Year-end payments
6. Independent inactive investor analysis
7. Deferred compensation plan contributions
8. Independence of the board of directors
9. Viewpoint of a hypothetical investor contemplating purchase of the company as to whether such potential investor would be willing to pay the compensation.

Failure to pass the reasonable compensation test will result in the company's loss of all or part of its deduction. Analysis and examination of a company's compensation deductions in light of the relevant listed factors can provide the company with the assurance that the compensation it pays will be treated as reasonable -- and may in the process prevent the loss of its deductions.

Note: In the case of publicly held corporations, a separate $1 million dollar per person cap is also placed on deductible compensation paid to the CEO and each of the four other highest-paid officers identified for SEC purposes. (Certain types of compensation, including performance-based compensation approved by outside directors, are not included in the $1 million limitation.)

The S Corp Enigma

The opposite side of the reasonable compensation coin is present in the case of some S corporations. By characterizing compensation payments as dividends, the owners of these corporations seek to reduce employment taxes due on amounts paid to them by their companies. In these cases, the IRS attempts to recharacterize dividends as salary if the amounts were, in fact, paid to the shareholders for services rendered to the corporation.

Caution. In the course of performing the compensation-dividend analysis, watch out for contingent compensation arrangements and for compensation that is proportional to stock ownership. While not always indicators that payments are distributions of dividends instead of compensation for services, their presence does suggest the possibility. Compensation plans should not be keyed to ownership interests. Contingent and incentive arrangements are also scrutinized by the IRS. The courts have frequently ruled that a shareholder has a built-in interest in seeing that the company is successful and rewarding him for increasing the value of his own property is inappropriate. Similar to the reasonable compensation test, however, this rule is not hard and fast. Accordingly, the rules followed in each jurisdiction will control there.

Conclusions

Determining whether a shareholder-employee's compensation is reasonable depends upon many variables, such as the contributions that employee makes to your business, the compensation levels within your industry, and whether an independent investor in your company would accept the employee's compensation as reasonable.

Please call our office for a more customized analysis of how your particular compensation package fits into the various rules and guidelines. Further examination of your practices not only may help your business better sustain its compensation deductions; it may also help you take advantage of other compensation arrangements and opportunities.

If someone told you that you could exchange an apartment house for a store building without recognizing a taxable gain or loss, you might not believe him or her. You might already know about a very valuable business planning and tax tool: a like-kind exchange. In some cases, if you trade business property for other business property of the same asset class, you do not need to recognize a taxable gain or loss.

Not a sale

An exchange is a transfer that is not a sale. Essentially, it is a trade of like property.

In an exchange, property is relinquished and property is received. If the transaction includes money or property that is not of a like kind (referred to as "boot"), the transaction does not automatically become a sale. Any gain realized in the transaction, however, is recognized in that tax year to the extent of boot received.

In a like-kind exchange, the basis in the property received is the same as the basis in the property relinquished, with some adjustments. Any unrecognized gain or loss on the relinquished property is carried over to the replacement property. At a future time, the gain or loss will be recognized. If there is boot in the exchange and the gain is recognized, basis is increased by the amount of recognized gain.

The like-kind rules also require that property must be business or investment property. The taxpayer must hold both the property traded and the property received for productive use in its trade or business or for investment. Additionally, most stocks, bonds and other securities are not eligible.

Example

Jesse owns an office supply company and wants to expand his business. Carmen owns a restaurant and also wants to expand her business. Both individuals own parcels of land for investment that would benefit their respective expansion plans. The adjusted basis of both properties is $250,000. The fair market value of both properties is $400,000. Jesse and Carmen engage in a like-kind exchange. Neither Jesse nor Carmen would report any gain or loss.

More than two properties

Like-kind exchanges can involve more than two properties. While the rules are complicated, the basic approach is to combine properties into groups consisting of the same kind or class. If you are interested in a like-kind exchange involving more than two properties, we can help you.

Timing

The exchange does not have to take place at a given moment. If property is relinquished, the replacement property can be identified and received anytime within a specific period. Replacement property must be identified within 45 days after property is relinquished. The replacement property has to be received within 180 days after the transfer but sooner if the tax return is due before the 180 days are over (although the due date takes into account any extension that is permitted).

Reporting

A like-kind exchange must be reported to the IRS. The report must be made even if no gain is recognized in the transaction.  Again, our office can help you make sure that everything that needs to be reported to the IRS is reported.

Whether a parent who employs his or her child in a family business must withhold FICA and pay FUTA taxes will depend on the age of the teenager, the amount of income the teenager earns and the type of business.

FICA and FUTA taxes

A child under age 18 working for a parent is not subject to FICA so long as the parent's business is a sole proprietorship or a partnership in which each partner is a parent of the child (if there are additional partners, the taxes must be withheld). FUTA does not have to be paid until the child reaches age 21. These rules apply to a child's services in a trade or business.

If the child's services are for other than a trade or business, such as domestic work in the parent's private home, FICA and FUTA taxes do not apply until the child reaches 21.

The rules are also different if the child is employed by a corporation controlled by his or her parent. In this case, FICA and FUTA taxes must be paid.

Federal income taxes

Federal income taxes should be withheld, regardless of the age of the child, unless the child is subject to an exemption. Students are not automatically exempt, though. The teenager has to show that he or she expects no federal income tax liability for the current tax year and that the teenager had no income tax liability the prior tax year either. Additionally, the teenager cannot claim an exemption from withholding if he or she can be claimed as a dependent on another person's return, has more than $250 unearned income, and has income from both earned and unearned sources totaling more than $800.

Bona fide employee

Remember also, that whenever a parent employs his or her child, the child must be a bona fide employee, and the employer-employee relationship must be established or the IRS will not allow the business expense deduction for the child's wages or salary. To establish a standard employer-employee relationship, the parent should assign regular duties and hours to the child, and the pay must be reasonable with the industry norm for the work. Too generous pay will be disallowed by the IRS.