Key Takeaways
- Kies points out that things haven't gone well for taxpayers in easement cases.
- Automating the tax crime hunt.
- ACA deal may be key to other tax bills in 2026.
- Tariff suits snowball.
- The taxing business of espionage.
- Typing Day.
IRS to Make Final Conservation Easement Settlement Offer - Benjamin Valdez, Tax Notes ($):
Speaking January 7 at a conference sponsored by the District of Columbia Bar Taxation Community, Kies said it would send “the wrong message” to make the settlement too favorable for taxpayers who participated in the transactions, which involve inflating the value of property and taking large deductions for easements.
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The IRS plans to issue a statement summarizing its wins in easement cases to further deter taxpayers, according to Kies. “We actually think the investors may not necessarily understand how much peril they’re in in terms of litigating,” he said.
The typical conservation easement deal involved a purchase of rural land for, say, $3,000 per acre, followed by the creation of a donation to a conservation group that prohibited development of the land.
That's fine as far as it goes, and the donor was entitled to a fair market value charitable deduction of the value given to the conservation non-profit. The twist was how they came up with the valuation. Typically the value was based on a hypothetical operating business - say a mine or quarry - using the land, without regard to the actual purchase price of the land. This hypothetical business would be valued at many times the purchase price of the land. These deductions were sold to partnership "investors" looking to buy charitable deductions at bargain prices.
The courts have consistently rejected valuing land based on imaginary businesses and have regularly upheld 40% gross valuation overstatement penalties.
Related: Eide Bailly IRS Dispute Resolution and Collections Services.
Tax season hasn't started, but we're already talking overtime
IRS Responds to Overtime Reporting and Calculation Questions - Trevor Sikes, Tax Notes ($):
Under section 225, only overtime that is mandated by the Fair Labor Standards Act (FLSA) is qualified for the deduction.
The qualifying overtime is the "half" of "time and a half" FLSA overtime.
What Will The 2026 Filing Season Look Like? - Janet Holtzblatt, TaxVox:
But in 2026, it’s likely that many taxpayer calls will go unanswered. Earlier in 2025, the IRS projected a need for 3,500 more employees just to achieve the 85 percent target. After a hiring freeze ended in August, the IRS began a recruitment blitz for 2,150 customer service positions. The results are not public yet, but the shutdown likely slowed hiring and further reduced the appeal of government work. Moreover, the exodus of thousands of experienced staff left the IRS with fewer people to train the new hires.
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Yet, taxpayers may be seeking far more help this season. For example, because employers’ reporting requirements for tax-exempt tips and overtime (paywall) have been delayed for at least a year, workers will be on their own to identify and document which income qualifies for the exemptions. Moreover, many restaurant workers will experience sticker shock when they discover that the service fees they received in lieu of tips are not tax exempt. The IRS can expect calls for help on both those issues.
Automating the Tax Crime Hunt
Personnel Losses Drive Criminal Tax Investigators to Technology - Nathan Richman, Tax Notes ($):
Speaking January 7 at a conference in New Jersey, Jenifer L. Piovesan, special agent in charge of CI’s Newark field office, said the division’s personnel losses in 2025 from both the deferred resignation program and normal retirements have set it back to staffing levels from 2013 or 2014.
“With the advancements of technology — and we have a lot of younger agents who really know how to utilize that technology and data mine — that makes CI able to work the investigations just as well as we did when maybe we had more employees,” Piovesan said.
In Congress: ACA Tax Credit Extension Vote Looms; Key to Other Tax Bills?
House's ACA Credit Expansion Edges Toward Vote - Asha Glover, Law360 Tax Authority ($):
The House voted 221-205, with nine Republicans voting with Democrats, to begin consideration of a discharge petition that would extend through 2028 the tax credit expansion implemented under the American Rescue Plan Act of 2021. The Inflation Reduction Act, which Biden signed into law in 2022, extended the credit expansion through the 2025 tax year.
The House vote is expected today. Senate passage of this bill is unlikely, but negotiations on a compromise extension continue.
ACA Deal a Prerequisite to Other Tax Bills, Democratic Staff Say - Zach Cohen, Bloomberg ($):
Members of the minority on Capitol Hill are likely to balk at allowing tax extenders or changes to the business side of the tax code to “jump the line” in priority in upcoming government funding legislation, said Andrew Grossman, chief tax counsel for House Ways & Means Committee ranking member Richard Neal (D-Mass.).
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The comments emphasize the stakes for congressional negotiations over the pandemic-era boost to health-care subsidies whose expiration precipitated the longest-ever US government shutdown last year. The enhanced premium tax credit expired last week, putting millions of Americans at risk of losing their health insurance as premium payments spike.
How Trump once again rattled health care talks - Laura Weiss and Andrew Desiderio, Punchbowl News:
But it may have the exact opposite effect.
On Tuesday, Trump told Republicans to “be flexible” when it comes to restrictions on federal funding for abortion, known as the Hyde Amendment, seen as the biggest obstacle to a bipartisan Obamacare deal.
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To many Republicans, the episode was further evidence that a deal simply can’t get done without intense involvement from the White House and, in some cases, Trump personally.
Taxpayer Advocate on Disaster Relief Bill Passage
A Win for Taxpayers: Disaster Related Extension of Deadlines Act - Erin Collins, NTA Blog:
Fortunately, mirroring Legislative Recommendation #56 in the 2026 Purple Book, the Disaster Related Extension of Deadlines Act modifies the language in IRC § 7508A to include the disaster-related postponement period in the lookback period calculation, just as the tax code already does for returns filed pursuant to an extension. By including the postponed period in the lookback calculation, the law ensures that timely refund claims result in actual refunds exactly as taxpayers would expect.
Global Minimum Tax Deal: Questions Remain
Tax News & Views International Weekly: The Global Tax Deal's Highlights and Gaps - Alex Parker, Eide Bailly:
Since the preliminary deal was announced last June, the lack of clear details about how this proposed truce between the U.S. and OECD nations would work has given many corporations pause about whether it could be truly implemented. The broad strokes of the agreement—that the existing U.S. global minimum tax, the 14% tax on net CFC tested income, already prevented tax avoidance and base erosion, making the OECD’s minimum tax unnecessary—were clear enough. And the promise was enough to convince Republicans in Congress to table their retaliatory legislation. But many still wondered if this was just a delay for an inevitable trade war.
This week’s announcement largely allayed those fears, and was hailed by the business community as a major step forward toward tax certainty.
But if U.S. taxpayers think this means they can forget about Pillar Two entirely, they’re in for some winter blues.
Related: Eide Bailly International Tax Services.
Tariffs: Refund Suits Snowball; Trump Options
The Stampede of Companies Seeking US Tariff Refunds Is Growing - Brendan Murray, Bloomberg:
More than 1,000 companies including Costco and Goodyear Tire have jumped into the legal fight for refunds. Already in 2026, dozens more including Dole Fresh Fruit and J. Crew have joined the fray and sued, according to the latest Bloomberg Big Take.
Friday at 10 a.m. in Washington will mark the first time the court releases opinions this year, but the cases aren’t announced in advance.
Trump’s Options If Supreme Court Says His Tariffs Are Illegal - Isabel Gottlieb, Bloomberg ($):
The IEEPA tariffs have remained in effect as the legal proceedings continue. If the Supreme Court concurs that these duties are unlawful, large swathes of the levies Trump has imposed so far in his second term could come undone and leave the government on the hook for tens of billions of dollars in refunds .
Still, there are other means by which his tariffs policy could continue. While the Constitution gives Congress the power to levy taxes and duties, lawmakers have delegated some of their authority to the executive branch through a number of statutes. These laws give Trump at least five fallback options to impose tariffs in different ways. In general, these alternatives come with more limits and procedural restrictions, meaning there’s less leeway for Trump to impose tariffs virtually immediately and set the rates as high as he chooses.
What Cannabis Rescheduling Means for Taxes
Cannabis may see tax relief under Trump order - Mark Friedlich, Accounting Today:
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Section 280E is a provision in the Tax Code that only applies to businesses trafficking in Schedule I or II drugs. It blocks them from deducting ordinary business expenses. Schedule III drugs don't face this restriction.
Right now, cannabis businesses operating legally under state law still can't deduct basic costs like rent, salaries or marketing. They can only deduct the cost of goods sold. That creates effective tax rates that can hit 70% or more. It's also why so many operators struggle to turn a profit even when their revenue looks good. If marijuana moves to Schedule III, that will change significantly. Businesses would be able to deduct business expenses under Section 162, just like any other company. Effective tax rates would drop significantly.
Blogs and Bits
Get ready to file and other January 2026 tax moves - Kay Bell, Don't Mess With Taxes. "3. Pay your estimated taxes: This third January 2026 tax task is a far less welcome one. If you pay estimated tax, the prior year’s final payment is due Jan. 15."
It’s Time to Issue 2025 Form 1099s - Russ Fox, Taxable Talk. "Remember, the deadline for submitting 1099-NECs for “Nonemployee Compensation” (e.g. independent contractors) to the IRS is now at the end of January: Those 1099s must be filed by Monday, February 2nd. (We get two extra days this year because January 31st falls on a Saturday.)"
Related: Eide Bailly Client Accounting Services.
US Has the Most Progressive Tax System in the Developed World - Adam Michel, Liberty Taxed. "Taking a simple average of the highest- and lowest-progressivity states or provinces, the United States as a whole outranks every other country in the dataset, giving it the most progressive tax system."
The Taxing Business of Being a Spy
When Aldrich Ames Sued the IRS Over His Espionage Tax Bill - Trevor Sikes, Tax Notes ($):
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The IRS’s deficiency and penalty assessments were based on the unreported cash deposits that Ames had made from 1989 through 1992.
However, Ames contended that because he had been promised $2 million in 1985 by the Soviets, he had actually constructively received the income at issue in 1985.
Interesting argument. Assuming that the omission constituted tax fraud, the timing wouldn't matter much under current law. The statute of limitations for assessment never starts running on a fraudulent return.
The moral? First, don't be a Soviet spy, first. Second, it's reportable, even if you don't get a 1099.
What day is it?
It's Typing Day! A special shoutout to the aging cohort that took typing classes in high school. it turned out to be excellent training when computers hit the workplace.
Make a habit of sustained success.
