Congress Passes Bill Requiring the Internal Revenue Service to Clarify Math-Error Notices
Congress approved a bipartisan bill directing the IRS to make its math error notices clearer and more transparent. This legislation requires each notice to reference the specific line item in question, provide an explanation of the adjustment, and include direct contact information for taxpayer support. It also introduces a pilot program for sending these notices via certified mail to ensure taxpayers receive them promptly and understand their appeal rights.
Why It Matters:
Busy tax professionals often spend hours deciphering vague IRS notices. Clearer formatting will reduce confusion, streamline notice resolution, and help practitioners advise clients more effectively. This change also strengthens taxpayer rights and may reduce disputes arising from unclear IRS communication.
Actionable Steps:
- Review your IRS notice response workflow for upcoming format changes.
- Train staff on interpreting the new notice structure.
- Encourage clients to forward IRS correspondence promptly.
IRS Limits Operations During Government Shutdown
The IRS announced that, due to the ongoing federal government shutdown, most in-person and phone services are suspended. While the agency continues to process electronic returns and direct-deposit refunds, correspondence and audit functions are delayed. All statutory filing and payment deadlines remain in force despite the limited operations.
Why It Matters:
Clients may wrongly assume the federal government shutdown excuses late filings or payments. For tax professionals, this creates a communication challenge and potential compliance risk. Firms should anticipate slower IRS responses and prepare for processing backlogs once operations resume.
Actionable Steps:
- Remind clients that filing and payment deadlines remain unchanged.
- Anticipate longer IRS response times and set client expectations early.
- Monitor IRS updates for service resumptions and backlogs.
IRS Announces 2026 Inflation Adjustments
The IRS released Revenue Procedure 2025-32 detailing inflation-adjusted amounts for over 60 provisions for tax year 2026. The standard deduction will rise to $32,200 for joint filers and $16,100 for single filers, with corresponding increases across AMT exemptions, foreign earned income exclusions, and other thresholds. These adjustments account for inflation and updates from recent tax legislation.
Why It Matters:
Knowing these figures early allows firms to plan year-end strategies, update software, and adjust estimated tax calculations. Clients may need to reassess withholdings, business structures, or income-timing decisions based on the new thresholds.
Actionable Steps:
- Update tax planning tools with 2026 thresholds.
- Adjust client estimates and projections using new figures.
- Communicate key changes to clients before year-end planning meetings.
IRS Issues New FAQs on Form 1099-K Reporting Rules
The IRS released updated FAQs clarifying Form 1099-K reporting thresholds following changes in the One Big Beautiful Bill Act (OBBBA). The reporting threshold has reverted to $20,000 in payments and 200 transactions, reversing the lower $600 requirement that had caused some confusion among small businesses and gig-economy workers. The guidance also explains how third-party payment processors should handle corrections and backup withholding.
Why It Matters:
This rollback significantly reduces the number of taxpayers receiving 1099-Ks, but confusion remains. Tax professionals must ensure clients understand that, even without a form, income from digital platforms is still taxable. Firms should also stay alert for potential future threshold changes.
Actionable Steps:
- Identify clients using platforms like PayPal, Venmo, or Etsy.
- Clarify that all income is taxable, even without a 1099-K.
- Update client education materials with the revised reporting rules.
AICPA Pushes for IRS Guidance on Tipped Wages and Overtime Deductions
The AICPA has requested IRS clarification on new deductions for tipped wages and overtime pay introduced under the OBBBA. Without formal guidance, taxpayers and preparers are uncertain how to calculate or substantiate these deductions. The accounting profession is urging the IRS to publish clear rules to prevent inconsistent filing positions and compliance risks.
Why It Matters:
Service-industry clients may benefit from these new deductions, but the lack of clarity poses risks if taken incorrectly. Tax and accounting professionals should track pending guidance and prepare documentation systems now to support eligible deductions later.
Actionable Steps:
- Flag clients in service industries for potential eligibility.
- Track pending IRS guidance to adjust compliance advice quickly.
- Maintain thorough payroll and tip documentation in anticipation of rules.
SSA Commissioner to Also Serve in New IRS Role
In a rare dual appointment, the head of the Social Security Administration will take on additional oversight responsibilities at the IRS. This move is intended to strengthen coordination between agencies on taxpayer identity verification, data sharing, and fraud prevention.
Why It Matters:
Enhanced interagency coordination could tighten identity-theft safeguards and streamline wage reporting between the SSA and IRS. For tax and accounting professionals, it signals ongoing emphasis on cybersecurity, data integrity, and cross-agency compliance verification.
Actionable Steps:
- Review firm data security and identity-verification protocols.
- Educate clients on preventing identity theft and tax fraud.
- Watch for new SSA-IRS data sharing or compliance initiatives.