Tax News & Views Risk of Shutting Down Chocolate Cake Roundup

Shutdown Risk

Risk of Shutdown During Filing Season Rises Amid Funding Battle – Cady Stanton, Tax Notes ($):

Democratic ire over funding for the Department of Homeland Security is threatening to lead to another government shutdown in February that would hit the IRS just as filing season kicks off.

Senate Democrats have vowed not to support any government funding package that includes appropriations for immigration enforcement agencies following the killing of Alex Pretti in Minneapolis January 24, calling for a rewrite of the legislation funding DHS.

The fiscal 2026 DHS funding bill is one of six remaining appropriations bills that have been passed by the House but not yet voted on in the Senate. They all need to be approved before the January 30 government funding deadline to avoid a partial government shutdown.

Senate GOP Tees Up Funding Bill Vote Despite Democrats’ Threats – Lillianna Byington, Bloomberg ($):

Senate Republicans moved forward Monday with a six-bill funding package, even though it faces a revolt from Democrats.

The package of spending bills, passed by the House last week, got its first and second reading in the Senate Monday, setting it up for further action this week. The procedural step escalates the threat of a shutdown at the end of the week as both sides dig in on a standoff over homeland security funding.

Filing Season Begins

Tax Filing Season Kicks Off as IRS Shakes Off Hangover from 2025 – Erin Slowey, Bloomberg ($):

The on-time kick-off of the tax filing season Monday is an early positive indicator after months of preparation by the agency. Still, the IRS is shaking off the hangover from the steep workforce cuts, leadership exits, and government shutdown in 2025 that may have ramifications that bleed into this season.

The risk for another government shutdown is also in the mix again with the clock to fund the government running out Friday. Previous shutdown plans suggest that most IRS employees are likely to stay on during a shutdown occurring during a filing season.

Trump’s High-Stakes Bid to Dole Out $100 Billion More in Tax Refunds – Richard Rubin, Wall Street Journal:

Republicans and President Trump designed their tax cuts for this moment, creating a refund bonanza that will land in Americans’ bank accounts well ahead of the midterm elections.

The annual tax-filing season that opened Monday will produce a cash surge estimated at $100 billion beyond last year’s $329 billion total, and it is engineered to buoy Republicans’ sagging voter approval. Public confidence in Trump’s economic leadership has slumped, and better-than-expected growth hasn’t overcome Americans’ anxiety about the cost of living and a slowed job market.

At stake is whether Republicans can retain narrow House and Senate majorities that give them the authority to control the federal agenda and prevent investigations of Trump.

How to file your taxes for free in 2026 – Julie Z. Weil, Washington Post:

The Trump administration may have shuttered Direct File — the IRS’s short-lived experiment in tax-preparation software — but it doesn’t mean you have to pay to file your taxes.

There are plenty of options for free filing this tax season, which begins today and runs through April 15.

Trump Hobbled the I.R.S. This C.E.O. Now Has to Make It Work. – Andrew Duehren, New York Times:

Many Americans expect a refund, and they want it quickly. For poor Americans, their tax refund, padded by credits that return cash to people even if they did not owe any income tax, is often the single largest payment they receive in a year. Delays can mean skipped meals and missed bills. The margin for error is small.

This year’s filing season, which began on Monday, could be an even more formidable challenge than usual for the I.R.S. and Mr. Bisignano. Taxpayers may have difficulty parsing the fine print of the new tax cuts. Mr. Trump’s promise of “no tax on overtime,” for example, is in fact just a partial tax break that applies to a portion of certain federally mandated overtime wages. Rules like that could fuel a rush of additional questions for the I.R.S. during the 10-week filing season, which the agency will have to handle with its significantly smaller staff.

The New Tax Rules That Can Get You a Bigger Refund This Year – Ashlea Ebeling & Richard Rubin, Wall Street Journal:

Americans can expect smaller tax bills and bigger refunds this year—after they navigate a pile of new rules from last year’s tax law.

“Any time people have big life changes or there are law changes, people can miss benefits they’re entitled to,” said Andy Phillips, vice president of H&R Block’s Tax Institute.

Upcoming Clean Fuel Tax Credit Rules

White House Concludes Review of Clean Fuel Tax Credit Rules – Michael Rapoport, Bloomberg ($):

Proposed rules for a tax credit aimed at encouraging the production of “green,” climate-friendly fuels have cleared White House regulatory review, putting them on the verge of release.

Review of the proposed rules (RIN 1545-BR30) for the 45Z clean fuel production credit was concluded Friday by the White House Office of Information and Regulatory Affairs, according to OIRA’s website.

Tariffs

Canada Says China Tariff Agreement Isn't Free Trade Deal – Dylan Moroses, Law 360 ($):

Canadian Prime Minister Mark Carney and the country's foreign affairs minister downplayed the country's recent tariff deescalation with China, indicating Canada will not pursue a free trade agreement with China as President Donald Trump threatened a 100% tariff this weekend over the deal.

Carney told reporters Sunday that Canada will honor its commitment under the United States-Mexico-Canada Agreement not to pursue free trade agreements with nonmarket economies without notification, and added there is no intention to pursue such a deal with China.

Pandemic Penalty Relief

Most Avoided Debt Penalties During Pandemic, TIGTA Says – Anna Scott Farrell, Law 360 ($):

Most taxpayers who were supposed to receive relief from Internal Revenue Service penalties for failing to pay their tax debts during the pandemic received it, the Treasury Inspector General for Tax Administration reported Monday.

The IRS automatically issued the COVID-19 penalty relief to 4.9 million taxpayers, which was more than 99% of taxpayers who were eligible, TIGTA, the IRS' watchdog, said in a report.

Some Taxpayers Missed Out on Pandemic Penalty Relief, TIGTA Says – Tyrah Burris, Tax Notes ($):

The IRS failed to mark over 2,000 taxpayer accounts as eligible to receive relief for penalties accrued on their accounts during the COVID-19 pandemic, according to an agency watchdog.

The Treasury Inspector General for Tax Administration found that as of April 2024, 2,138 taxpayers were potentially eligible for relief from penalties for failure to pay and are potentially entitled to more than $463,000 collectively, according to a report released January 26.

Report: Nearly Five Million Eligible Taxpayers Received Failure to Pay Penalty Relief Due to the Effects of the Pandemic

Retirement Account Deadline

IRS Pushes Deadline For IRA Amendments To 2027 – Anna Scott Farrell, Law 360 ($):

The Internal Revenue Service extended the deadline for making amendments to individual retirement arrangements by another year, pushing the date to December 2027, according to guidance released Monday.

Custodians of the retirement accounts said they needed more time to comply with new requirements under the Secure 2.0 Act, given that the tax agency and the U.S. Department of the Treasury are still developing model language for making amendments, the IRS said in Notice 2026-9.

IRS Extends Deadline for SECURE 2.0-Based IRA Plan Changes – Brett Samuels, Bloomberg ($):

The Treasury Department is extending the deadline for Individual Retirement Accounts and Simplified Employee Pension (SEP) arrangements to implement plan amendments that comply with changes mandated by the SECURE 2.0 Act.

The IRS announced Monday an extension of the deadline until Dec. 31, 2027 as the agency develops model language for those managing the plans to use to become compliant with SECURE 2.0 and resulting regulations.

Blogs and Bits

Proposed Regs Reflect OBBBA Change to Backup Withholding on Third Party Payments – Parker Tax Pro Library. “The IRS issued proposed regulations under Code Sec. 6050W that revise the threshold for when certain third-party settlement organizations are required to perform backup withholding o comply with changes made by the One Big Beautiful Bill Act. The proposed regulations provide that third party settlement organizations generally are not required to backup withhold on payments settled through third party payment networks unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200. REG-112829-25.”

In the Courts

Justices' FCC Review Could Reshape IRS Penalty Disputes – Kat Lucero, Law 360 ($):

The U.S. Supreme Court's upcoming review of a pair of cases questioning the validity of the Federal Communications Commission's penalty authority could have ripple effects that further delineate the Internal Revenue Service's authority to impose penalties.

The high court agreed this month to review and consolidate the two cases to clarify how its landmark 2024 decision in U.S. Securities and Exchange Commission v. Jarkesy affects the FCC's enforcement authority, amid a split between the Second and Fifth circuits.

Maryland Lawyer Owes IRS $1.9 Million for Company’s Transfers – Alex Wolf, Bloomberg ($). “A Baltimore attorney who helped develop and execute a plan to transfer assets away from an insolvent company he directed owes the federal government nearly $1.9 million, a judge ruled.”

What Day is it?

It’s National Chocolate Cake Day! The perfect day. (Also, happy birthday Grams!)

Tax News & Views Risk of Shutting Down Chocolate Cake Roundup

Make a habit of sustained success.

Trina Pinneau