Basics & Beyond Monthly Update
Tax Newsletter
March 2026 | Volume 9, Issue 3
New Postmark Rules
Make sure to look at Issues 7 & 8. This is a nationwide change that could impact tax filings and the timing of the postmark dates if returns are mailed. Issue 7 & 8 are just two examples of alerts at the state level we have been able to locate. This will apply in the future to all mailings using the United States Postal Service.
Navigation Tips:
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Looking ahead to 2026
If you would like to plan your learning calendar, explore upcoming live webinars and self-paced on-demand options.
In this Month’s Issue
- Issue 1 – Streamline Filing Season with Tax Pro Account & IRS Online Accounts
- Issue 2 – IRS FAQs on Executive Order 14247: Payment Modernization
- Issue 3 – Expanded IRS Payment Plans for Businesses
- Issue 4 – Adoption Tax Credit Updates for 2025
- Issue 5 – Trump Accounts: Planning Opportunity for Younger Savers?
- Issue 6 – Illinois Bulletin: USPS Postmark Changes & Tax Deadlines
- Issue 7 – Wisconsin Alert: USPS Postmark Rule Impact
- Issue 8 – DOL Proposes Changes to Independent Contractor Rule
- Issue 9 – OBBB Charitable Deduction Changes Shift Giving Strategy
- Issue 10 – Digital Asset Reporting Required Even Without Form 1099-DA
- Issue 11 – Personal Use of Company Vehicles: IRS Valuation Rules (Notice 2026-10)
- Issue 12 – Practicing in a Downsized IRS Environment: Risk & Diligence
- Issue 13 – Protecting Against Unauthorized EFIN Use
- Issue 14 – March 2026 Applicable Federal Rates (Rev. Rul. 2026-6)
Issue 1 – Tax Pros: Get Ready for the Filing Season and Save Time with Tax Pro Account; Encourage Clients to use their IRS Individual Online Account
With the 2026 filing season in full mode the IRS encourages tax professionals to help their clients set up their IRS Individual Online Account. 📌
IRS Individual Online Account
With an IRS Individual Online Account, taxpayers can securely access their federal tax information and receive notifications from their tax professional. Taxpayers can:
- View tax records, including adjusted gross income and transcripts.
- Make, schedule, and view payments.
- Check the status of a refund.
- Get or view their Identity Protection PIN. 📌
- Authorize a tax professional to access their tax records digitally.
- View available Forms W-2 and certain 1099s.
Issue 2 – IRS issues FAQs about Executive Order 14247: Modernizing Payments to and From America’s Bank Account
The Internal Revenue Service issued frequently asked questions 📌 to help taxpayers, businesses, and other stakeholders understand the changes under Executive Order 14247: Modernizing Payment To and From America’s Bank Account. 📌
These changes apply to:
- Payments sent by the federal government, including tax refunds, benefits, grants, and vendor or contractor payments; and
- Payments made to the federal government, including tax balances due, fees, penalties, and other payments from individuals, businesses, nonprofit organizations, and state or local partners.
Tax professionals should encourage their clients to:
- Use direct deposit 📌 for refunds by providing accurate bank or prepaid debit card information when filing.
- Choose electronic payment options when paying taxes, such as IRS Direct Pay, 📌 Electronic Federal Tax Payment System, 📌 or other approved methods.
- Review account information to ensure bank details are current and correct.
- Visit IRS.gov 📌 to learn about electronic payment 📌 options and available resources for taxpayers without a bank account.
The FAQ are several pages long and we have limited what is in the newsletters to the most frequent questions we are aware of. To access the complete list of FAQ’s go to: Questions and answers about Executive Order 14247: Modernizing Payments To and From America’s Bank Account 📌
Q1. What changes are being made to how refunds are delivered pursuant to Executive Order 14247 and what effect do the changes have on the process of filing a tax return? (Added Jan. 27, 2026)
A1. Executive Order 14247 states that the Treasury must stop issuing paper checks effective Sept. 30, 2025, to the extent permitted by law. The federal government must continue to issue certified payments in some limited circumstances and will issue a limited number of paper checks in cases where no alternative is available. Otherwise, the IRS generally stopped issuing paper refund checks for individual taxpayers after Sept. 30, 2025.
No changes are being made to the process of filing a tax return itself based on Executive Order 14247 at this time. Until further notice, taxpayers should continue to use existing filing options.
Q2. Will taxpayers without bank accounts still be able to receive refunds? (added Jan. 27, 2026)
A2. Yes. While direct deposit into a bank account will remain the primary method for issuing refunds, the Executive Order explicitly acknowledges that not all individuals have access to traditional banking services. Alternative electronic payment methods, including payments via certain mobile apps and prepaid debit cards, will be available to serve these individuals. Limited exceptions to the paper check phase-out will also be established.
Q3. Will the transition delay tax refunds? (added Jan. 27, 2026)
A3. In most cases, no. One of the goals of Executive Order 14247 is to reduce delays and ensure timely, accurate payments. Electronic delivery is faster and more secure than paper checks. In most cases, taxpayers will receive their refunds sooner by using electronic methods, eliminating the risk of their paper check being lost or stolen.
Q4. What will happen if taxpayers do not include direct deposit information on tax returns? (added Jan. 27, 2026)
A4. Providing electronic payment information is voluntary. If taxpayers do not provide this information and no exception applies, their refunds could take longer to process. Taxpayers should provide direct deposit information when filing a tax return. If banking information is missing when filing a tax return, the tax return will still be accepted and processed. However, when filing electronically, the taxpayer may receive an alert notifying them of the missing banking information and outlining the next steps if they are due a refund.
For all taxpayers with missing information, the IRS will send letters to individuals using their last-known address on record, asking them to update their banking information if they did not provide it on their tax return, or if their financial institution rejected the direct deposit.
The taxpayer will then receive a CP53E notice in the mail requesting a response within 30 days, either to provide banking information or to explain why such information cannot be provided. Additionally, the Where’s My Refund? tool on IRS.gov will provide messaging related to the need for banking information.
The taxpayer will be able to use the IRS Individual Online Account to provide this information. For security reasons, IRS employees cannot take direct deposit information over the phone or in person.
Once the taxpayer provides the direct deposit information or exception, the refund will be immediately released via direct deposit or paper check. If there is no response to the notice and there are no other issues with the tax return, the refund will be released as a paper check after six weeks.
Q5. Will the IRS contact taxpayers by phone or text to request banking information if a taxpayer did not provide it when they filed their tax return? (added Jan. 27, 2026)
A5. No, the IRS will only contact taxpayers by sending a letter through the U.S. mail for this purpose, using the taxpayer’s last-known address.
Q6. Currently, the IRS issues paper refund checks to decedent accounts. Will this change? (added Jan. 27, 2026)
A6. The Executive Order aims to transition to electronic-based payments; however, no changes have been made to how refunds currently are issued to deceased people. When changes are made, the IRS will provide additional guidance. In the meantime, the IRS will continue to accept or generate checks in accordance with current practice.
Q7. Does the Executive Order apply to payments made “to” the IRS? (added Jan. 27, 2026)
A7. Yes. The Executive Order requires federal agencies to modernize both outgoing and incoming payments. Incoming payments made to the IRS encompass all types of transactions, including payment of tax liabilities, enrolled agent fees, pre-filing agreements, and advanced pricing agreement fees. For now, checks and money orders will still be accepted. However, the IRS strongly encourages taxpayers to make payments using existing electronic options. Over time, the IRS will reduce reliance on paper checks and money orders for receiving payments, with limited exceptions made for specific situations such as those involving hardships, and/or legal and procedural requirements.
Q8. What other payment options are available? (added Jan. 27, 2026)
A8. The IRS is expanding its digital payment system capabilities to make it easier for taxpayers to pay electronically. Currently, payment options available for taxpayers and third parties for many transaction types include debit/credit card or digital wallet, IRS Direct Pay (direct from a bank account with no fee), IRS Individual Online Account, IRS Business Tax Account, or Electronic Federal Tax Payment System (EFTPS). EFTPS payment options will be sunset for individual taxpayers in late 2026. Depending on the payment method, processing fees may apply.
Not all transaction types are eligible for digital payment options. Taxpayers should review the correspondence they received and visit the Payment options page on IRS.gov 📌 to determine which digital payment methods are available for their specific situation.
Q9. How does the phase-out of paper checks affect how businesses receive refunds (added Jan. 27, 2026)
A9. In the first year of implementation, after Sept. 30, 2025, the IRS will be adding the direct deposit option to most business tax return types. This will allow more businesses to receive refunds faster and more securely through electronic deposit. Over time, paper check refunds for businesses will be phased out. The IRS will accept checks when electronic payment methods are not available for a certain transaction type or in specific situations such as those involving hardships and/or legal and procedural requirements.
Q10. How can businesses make payments to the IRS? (added Jan. 27, 2026)
A10. The IRS is expanding its digital payment system capabilities to make it easier for taxpayers to pay electronically. Currently, payment options for businesses include debit/credit card or digital wallet, IRS Direct Pay (directly from a bank account), IRS Business Tax Account and Electronic Federal Tax
Payment System
Q11. How will international taxpayers without U.S. bank accounts receive funds? (added Jan. 27, 2026)
A11. International taxpayers should continue to use existing options to file returns, make payments and receive refunds. The IRS is developing secure alternatives, such as partnerships with international payment providers, to ensure timely access to refunds abroad.
Q12. How will international taxpayers make payments to the IRS? (added Jan. 27, 2026)
A12. Wire transfers remain available, and the IRS is working to expand existing services to new countries while exploring additional cross-border payment solutions to make international payments faster and more affordable for all taxpayers.
Issue 3 – Simple Payment Plans Have Expanded to Businesses
The IRS recently updated qualifications for Simple Payment Plans, 📌 formerly known as “Streamlined Installment Agreements,” to include business taxpayers. Simple Payment Plans are long-term payment arrangements available for qualified taxpayers.
On Dec. 3, 2025, the IRS updated how it processes business installment agreements. Now both the In-Business Trust Fund Express Agreement and the Business Streamlined Agreement are now processed under the updated Simple Payment Plan qualifications.
General qualifications
All applicants for a Simple Payment Plan must be current with all filing and payment requirements.
Businesses
With trust fund taxes: 📌
- $25,000 or less in assessed taxes, penalties, and interest, or
- $50,000 or less in assessed taxes, penalties, and interest for an out-of-business sole proprietorship
Without trust fund taxes:
- $50,000 or less in assessed taxes, penalties, and interest
Individuals
- $50,000 or less in assessed taxes, penalties, and interest
If a client does not qualify for a Simple Payment Plan, they may still qualify for another type of payment plan.
How to Apply
To apply for a Simple Payment Plan, businesses or their representatives can call the IRS at 800-829-4933 or visit their local Taxpayer Assistance Center (TAC). 📌 Individuals can still sign in to their IRS online account. 📌 call the IRS at the number on their notice or 800-829-1040.
Issue 4 – What's New for the Adoption Tax Credit in 2025
For 2025, several key changes and figures are important for taxpayers considering adoption:
- Refundable Credit: Up to $5,000 of the adoption credit is refundable per eligible child.
- Maximum Credit/Exclusion: The maximum credit or employer benefit exclusion is $17,280 per eligible child.
- MAGI Phase-out: The phase-out for the credit begins at $259,190 in Modified Adjusted-Gross Income (MAGI) and ends at $299,190.
- Indian Tribal Governments: Indian tribal governments now have equal authority with states for special-needs determinations, expanding recognition for special-needs adoptions.
Who Qualifies for the Credit and Eligible Expenses
The adoption credit is available for taxpayers who incur qualified adoption expenses while adopting an "eligible child." An eligible child is generally an individual under 18 or someone physically or mentally unable to care for themselves.
For special-needs adoptions, the child must be a U.S. citizen or resident approved by a state or Indian tribal government. For foreign adoptions, the credit can only be claimed after the adoption becomes final.
The credit is generally available to single filers, heads of household, and qualifying surviving spouses. Married couples typically must file jointly. Married individuals filing separately may qualify if they lived apart for the last six months of 2025 and meet certain support tests.
Worksheets for Form 8839
Clients will use Form 8839, Qualified Adoption Expenses, 📌 to calculate their adoption credit and any excludable employer-provided adoption benefits.
Issue 5 – Can a Trump Account Savings Plan be a Boon for the Younger Generation?
A Trump account is a type of traditional individual retirement account (IRA) established by an authorized individual for the exclusive benefit of a child listed in Form 4547, Part II.
The child listed in Form 4547, Part II, will be the owner of the initial Trump account (also referred to as the “account beneficiary” of the Trump account).
For the child to qualify to receive the $1,000 pilot program contribution to their Trump account, the child must meet additional requirements.
Although a Trump account is a type of traditional IRA, during the growth period, a Trump account is subject to special rules that do not to other IRAs.
During the growth period, Trump accounts can receive contributions from several different sources, including employer contributions. All Trump accounts must have a trustee, and the trustee of a Trump account must either be a bank or another person who is approved by the IRS to be a nonbank trustee of a Trump account.
The Account Beneficary
The child listed in Form 4547, Part II, is the owner of the initial Trump account (also referred to as the “account beneficiary” of the Trump account). Generally, an election can be made to establish an initial Trump account for a child if the child:
Is under age 18 at the end of the year in which the election was made (for an election in 2026, the child must have been born after December 31, 2008);
Has a valid social security number issued before the election is made (see Valid social security number (SSN), later); and
Has not had a Trump account election filed on their behalf.
A Valid Social Security Number is a Must- What is Considered VALID?
The child must have an SSN issued to them before the date of the Trump account election. A valid SSN for purposes of Form 4547 is one that is valid for employment and that is issued by the Social Security Administration (SSA) before the Trump account election is made.
If the child was a U.S. citizen when he or she received the SSN, the SSN is valid for employment.
If “Not Valid for Employment” is printed on the social security card and the child’s immigration status has changed so that the child is now a U.S. citizen or permanent resident, ask the SSA for a new social security card without the legend.
However, if “Valid for Work Only with DHS Authorization” is printed on the social security card, the child’s SSN is valid only as long as the DHS authorization is valid.
Who is an Authorized Individual – Eligible to Open a Trump Account?
An authorized individual may elect to establish an initial Trump account for a child by completing Form 4547. For more information, including whether you can make these elections online beginning in the middle of 2026, go to trumpaccounts.gov. 📌
- If the only election being made is to open an initial Trump account (and no election for a pilot program contribution is being made), an authorized individual is a legal guardian, parent, adult sibling, or grandparent of the child, in that order of priority.
- If more than one person meets the conditions to be an authorized individual, subject to the order of priority, and no prior Trump account election has been made for the child, then any of the authorized individuals can make the election.
For example, if the child does not have a legal guardian, then either parent of the child can make the election regardless of filing status. The authorized individual who is making the election must enter their information in Form 4547, Part I, and then complete Parts II and IV.
By making the election, the authorized individual is representing, under penalties of perjury, that he or she is authorized to open the initial Trump account for the child.
For example, if an adult sibling is making the election, they would be representing that there was neither a legal guardian nor parent of the child available to make the election.
Authorized individual to elect to both open an initial Trump account and to request a pilot program contribution.
If both an election to open an initial Trump account and an election for a pilot program contribution are being made, an authorized individual is an individual who anticipates that the child will be his or her qualifying child for the tax year in which the election is made. In addition, if the client is filing Form 4547 with their 2025 income tax return, then they do not have to have claimed the child as a dependent on the 2025 income tax return.
If it is later determined that the child is not the individual’s qualifying child for the year in which the election is made, these elections may still be effective as long as the child has satisfied the other requirements for receiving the pilot program contribution.
The authorized individual who is making these elections must enter their information in Form 4547, Part I, and complete Parts II, III, and IV.
By making these elections, the authorized individual is representing, under penalties of perjury, that he or she is authorized to open the initial Trump account for the child.
Pilot Program Contribution Election
An authorized individual can make an election for a $1,000 pilot program contribution to be made to a Trump account for a child, who:
Is anticipated to be the qualifying child of the authorized individual for the year in which the election is made.
- Is born after December 31, 2024, and before January 1, 2029.
- Has not had a prior pilot program contribution election processed for them.
- Is a U.S. citizen; and
- Has an SSN. See Valid social security number (SSN), earlier.
The election must be made on Form 4547.
For more information, including whether you can make these elections online beginning in the middle of 2026, go to trumpaccounts.gov. 📌 If your child is not eligible for a pilot program contribution, the election to open an initial Trump account must still be made on Form 4547 or, beginning in the middle of 2026, online.
Timing of pilot program contribution.
The Treasury Department will make the pilot program contribution as soon as practicable after the election is made and the Treasury Department can confirm with the initial Trump account trustee that the initial Trump account has been opened. However, no pilot program contribution will be deposited in the Trump account of a child earlier than July 4, 2026.
Section 128 Employer Contributions
A § 128 employer contribution to a Trump account can be made to the employee’s Trump account or a Trump account of a dependent of the employee.
During the growth period, § 128 employer contributions are subject to a $2,500 limit (subject to cost-of-living adjustments after 2027). § 128 employer contributions plus contributions from other sources (other than a pilot program contribution, qualified general contributions, and qualified rollover contributions) are subject to a $5,000 annual limit.
Growth Period
The growth period for a Trump account starts on the date the Trump account is established and ends on December 31st of the year before the calendar year in which the child turns age 18.
For example, a child born on October 1, 2025, would turn the age 18, on October 1, 2043. The last day of the growth period for this child would be December 31, 2042.
During the growth period, a subsequent Trump account (rollover Trump account) can be established for a child. The rollover Trump account must be funded by a trustee-to-trustee transfer of the entire account balance from the child’s existing Trump account (qualified rollover contribution).
Special rules during the growth period.
During the growth period, special rules apply, including:
- A Trump account can only be invested in eligible investments.
- A Trump account has a separate contribution limit from other IRAs.
- No deduction is allowed by an individual under section 219 for any contribution to a Trump account; and
- A Trump account generally restricts distributions from the account.
After the growth period, most of the special rules no longer apply and the rules governing traditional IRAs generally apply.
Important
Contributions cannot be made to a Trump account before July 4, 2026.
Taxation of Contributions
Contributions to a Trump account during the growth period are not includible in income by the account beneficiary when made. Pilot program contributions, qualified general contributions, and § 128 employer contributions do not create basis in a Trump account.
Qualified rollover contributions are transfers from a prior Trump account and carry over any basis attributable to the funds being transferred.
Contributions from other sources during the growth period create basis in the Trump account.
Aggregate Annual Limitation
During the growth period, contributions may be made to a Trump account even if the child does not have compensation that is included in their income.
Contributions from the pilot program, qualified general contributions, or qualified rollover contributions are not subject to an annual contribution limit.
However, the total of all other contributions (including section 128 employer contributions) during the growth period are subject to an annual limit of $5,000 (subject to cost-of-living adjustments after 2027).
We Are Still Awaiting Guidance
Several pieces are still unclear, including how the account will be treated when families apply for federal student aid.
Other questions:
- Who will manage the accounts?
- How will custodians handle compliance, investment restrictions and employer funding?
Important Note:
It appears the USPS has made some changes to the public’s understanding of Postmark Dates. This will have an impact on all mailing of tax returns.
The new wording, which was officially added to on Dec. 24, 2025, does not change the way mail is postmarked. Rather, it defines the postmark, explains locations at which a postmark is applied, clarifies the scope of information conveyed by a postmark, and advises customers of how to obtain evidence of the date on which the Postal Service accepted possession of their mailings.
We were able to discover two states which have set up alerts. This new directive applies to ALL U.S. States. Though your state may not have set up alert we all need to understand the new process.
Issue 6 – Illinois Issues Bulletin on USPS Postmark Changes Affecting Tax Filings
The United States Postal Service (USPS) has announced changes to postmarks that could impact tax filings in 2026. While the USPS postmark will still show the date of the first automated processing operation, the postmark may no longer reflect the date when the piece of mail was dropped off at a local post office. This change can directly impact time-sensitive documents such as tax returns and payments.
What steps can I take to file and pay my Illinois taxes timely?
Taxpayers are responsible for ensuring timely filing and payment.
Here’s how to avoid late penalties:
- File and pay electronically
The most reliable method to ensure that IDOR receives a return or payment on time is to submit them electronically.
Visit tax.illinois.gov 📌 for free electronic tax filing and payment options.
Use MyTax Illinois, available at mytax.illinois.gov 📌 to file and pay your return or payment for free.
- Drop off in person
Taxpayers who are not mandated under Illinois law to file or pay electronically may drop off a return or payment at an office of the Illinois Department of Revenue (IDOR). IDOR personnel will date stamp the documents to ensure accurate records
Issue 7 – Wisconsin Issues Bulletin on USPS Postmark Rule
Wisconsin law provides that tax returns and payments mailed to the Wisconsin Department of Revenue through the United States Postal Service (USPS) are timely if the document or payment is postmarked before midnight of the due date and received by the department within 5 days of the due date.
The USPS updated its Domestic Mail Manual effective December 24, 2025, to improve public understanding of postmarks and their relationship to the date of mailing. Postmarks are generally applied by the USPS via automation by machines at regional processing facilities. The date of a postmark applied at a processing facility may be one or more days after you deliver a mail piece (e.g., envelope) to the USPS, for example, at a retail location.
The postmark date is important as it determines, in part, whether your Wisconsin tax returns and payments are timely made or subject to late filing fees and interest.
Ensure your Wisconsin tax returns and payments are timely by doing one of the following:
- File and pay electronically! Electronically filed tax returns are fast and secure, and the client receives a confirmation number and/or notification that the return was received by the department. Wisconsin individual income tax returns may be filed electronically through the department's WisTax application, My Tax Account platform, or through approved third-party software. To pay the taxes electronically, visit the department's Make a Payment web page.
- Mail documents early. There could be several days between when you deliver a document to the USPS and when it is postmarked by the USPS. Mailing early reduces the chance of your envelope getting a postmark date that is after the due date of the return or payment.
- Go to a USPS retail location. There are several ways to get proof the USPS received your documents at a retail location.
- Manual postmarks are applied to envelopes, upon a customer's request, free of charge at the retail counter of every Post Office, station, or branch.
- Obtain a Postage Validation Imprint (PVI) Label at a retail location. These labels are printed by the USPS when you pay for postage at a retail location (e.g., you pay for regular or certified mail at the counter). The PVI labels are applied to the envelope upon acceptance by the USPS and indicate the date of acceptance.
The department's Customer Service Bureau can assist taxpayers that want to learn how to file and pay Wisconsin tax returns electronically – Individuals: (608) 266-2486, Businesses: (608) 266-2776.
Issue 8 – DOL Proposes Update to Independent Contractor Rule
As of February 2026, the Department of Labor (DOL) has delivered a new proposed rule regarding independent contractor classification under the Fair Labor Standards Act (FLSA). This move is expected to replace the 2024 rule with a framework that makes it easier to classify workers as independent contractors, likely reverting to a “core factors” approach focusing on control and opportunity for profit/loss.
Key aspects of the evolving DOL independent contractor landscape in 2026 include:
Impending Reversal: Following a change in administration, the DOL is moving to replace the Biden-era (March 2024) rule, which used a strict "totality-of-the-circumstances" analysis that made independent contractor classification more difficult.
Focus on Core Factors: The expected new rule is likely to bring back the "two core factors" from the 2021 approach: the nature and degree of control over work, and the worker’s opportunity for profit or loss based on initiative and/or investment.
Strategic Shift: The DOL is signaling a move toward favoring the classification of workers as independent contractors, particularly for gig workers, by focusing on whether they are in business for themselves, rather than economically dependent on the company.
Long-Term Impact: This change is expected to reduce the stricter, multi-factor, and equal-weight analysis introduced in 2024, providing more flexibility for businesses in worker classification
2024 Rule Still in Effect
In the meantime, the 2024 rule remains in effect as a formal regulation, but the Wage and Hour Division (WHD) has directed investigators not to apply the rule's analysis in current enforcement matters. Instead, investigators are to rely on longstanding guidance – Fact Sheet #13 and a reinstated opinion letter – during the review period. The proposed rule is expected to undergo OMB/OIRA review before it is released for public comment.
Fact Sheet # 13: https://www.dol.gov/agencies/whd/fact-sheets/13-flsa-employment-relationship 📌
Issue 9 – OBBB Charitable Deduction Rules Reshape Giving Strategies
Charitable Deduction Rules: In the U.S., individuals can deduct contributions to qualified charitable organizations if they itemize deductions rather than taking the standard deduction.
The One Big Beautiful Bill Act (OBBBA) (effective 2026) significantly alters charitable deductions by introducing a 0.5% adjusted gross income (AGI) floor for itemized gifts and capping the tax benefit for top earners at 35%.
While restricting high-income deductions, it introduces a "universal" deduction of up to $1,000 ($2,000 married) for non-itemizers.
Key changes under OBBBA include:
- 5% AGI Floor for Itemizers: Only charitable contributions exceeding 0.5% of your AGI can be deducted, meaning smaller donations might not provide a tax benefit.
- 35% Cap on Tax Benefit: For top-bracket earners (37%), the tax benefit of itemized deductions is limited to 35%, increasing the net cost of donations.
- Universal Deduction: Non-itemizers can deduct up to $1,000 (single) or $2,000 (married joint) for cash gifts to public charities.
- Permanent 60% Limit: The 60% AGI limitation for cash donations to public charities is made permanent.
Restrictions: The universal deduction excludes contributions to Donor-Advised Funds (DAFs).
Corporate Changes: A 1% AGI floor applies to charitable contributions made by corporations.
Strategic Impact: The changes encourage "bunching" donations and using non-cash assets to exceed the new AGI floor.
What is NEW in 2026
New deduction for non-itemizers
Under prior law, if a client claimed the standard deduction, they generally received no tax benefit for charitable gifts. Starting in 2026:
- Non-itemizers can claim an above-the-line charitable deduction of up to:
- $1,000 for singles
- $2,000 for married couples filing jointly
- 0.5% AGI “floor” for itemizers
- For taxpayers who itemize deductions, OBBBA introduces a new requirement.
- The client can only deduct charitable contributions that exceed 0.5% of your adjusted gross income (AGI).
This applies only to cash contributions made to qualified charities (contributions to donor-advised funds or private foundations generally don’t qualify).
Example:
If the client takes the standard deduction and donates $800 in cash to a qualified charity in 2026, they can deduct that $800 (up to the $1,000 cap), even though they do not itemize.
That means the first 0.5% of AGI in gifts doesn’t count toward your deduction.
Examples:
If the AGI in 2026 is $200,000, the first $1,000 (0.5% of $200,000) of donations will not reduce taxable income. Only amounts above that (e.g., donations beyond $1,000) are deductible.
If the AGI is $1,000,000, the first $5,000 of gifts are not deductible—only amounts beyond $5,000 are deductible. (0.5% of $1,000,000)
This changes a long-standing rule in which itemizers could generally deduct all qualified contributions (subject to percentage limits under earlier law).
- Permanent 60% AGI limit on cash gifts
- OBBBA makes the 60% of AGI limitation for deductible cash gifts permanent. In prior law, this higher limit was scheduled to revert to 50% after 2025.
- Now: The client can deduct cash contributions up to 60% of AGI every year, and any excess can be carried forward up to five years.
Example:
If your AGI is $100,000 and you give $70,000 in cash to a public charity in 2026, you can deduct up to $60,000 this year and carry forward the extra $10,000 to future years.
- Reduced effective tax value for high-income donors
Although not a formal “deduction rule” in the Internal Revenue Code, many tax planners interpret the OBBBA to cap the value of itemized deductions for taxpayers in the top (37%) federal bracket at about 35% of each dollar donated, rather than the previous approximate 37 cent benefit per dollar:
A $100,000 donation might previously reduce tax by about $37,000; under OBBBA it could reduce tax by closer to $35,000 for top-bracket taxpayers.
- Carryforward interaction
Charitable deductions that cannot be used in the year they are made (either because of the AGI floor or percentage limits) generally can still be carried forward for up to five years, subject to applicable limits in later years.
Issue 10 – Digital Asset Reporting Required Regardless of Form 1099-DA
The IRS has reminded taxpayers that they must report digital asset income, gains, or losses on their 2025 tax returns, regardless of whether they receive the new Form 1099-DA, Digital Asset Proceeds from Broker Transactions.
Taxpayers who sold or disposed of digital assets using a broker might receive the new form, which brokers use to report proceeds from digital asset dispositions. Digital assets include convertible virtual currencies and cryptocurrencies like Bitcoin, stablecoins, and nonfungible tokens.
Brokers must send taxpayers Form 1099-DA by February 17, 2026, providing the same information they report to the IRS. Most of these forms will not include the basis for digital asset transactions in 2025, so taxpayers will have to calculate the basis to determine their gains or losses.
When filing their taxes, all taxpayers must also answer "yes" or "no" to the digital asset question, regardless of whether they have digital assets. The IRS has issued guidance to help taxpayers determine how to answer the digital assets question.
Issue 11 – Valuing Personal Use of Company Vehicles: A Q&A on IRS Rules and Calculation Methods – Notice 2026-10
The personal use of an employer-provided vehicle is one of the most common and valuable noncash fringe benefits. It is also one of the more complex and error-prone areas in payroll administration. The IRS issues annual updates to vehicle valuation limits and mileage rates, as seen in recent guidance for 2026 (e.g., IRS Notice 2026-10) 📌, making the correct application of these rules an ongoing responsibility for payroll departments.
- Annual Lease Value (ALV) Method: This is the most common method, especially for higher-value vehicles. The employer determines the Fair Market Value (FMV) of the vehicle on the first day it is made available to the employee. Using an IRS-provided table (found in Publication 15-B), this FMV corresponds to a specific Annual Lease Value. The taxable income is calculated by multiplying this ALV by the percentage of personal miles driven during the year. If the employer also pays for fuel, its value must be added separately, either at 5.5 cents per personal mile or based on actual costs.
- Cents-per-Mile Method: This method is simpler but has strict limitations. It can only be used if the vehicle's FMV does not exceed a specific inflation-adjusted amount for the year (for example, the 2026 limit was $61,700 for cars, trucks, and vans). Additionally, the vehicle must be regularly used in the employer's business, or it must be driven at least 10,000 miles during the year (primarily by employees). The taxable value is calculated by multiplying the total personal miles driven by the standard business mileage rate for that year (e.g., 72.5 cents per mile for 2026). This valuation includes fuel, insurance, and maintenance.
- Commuting Value Method: This is the most restrictive rule. It can only be used if the employer has a written policy prohibiting all personal use other than commuting. The employee cannot be a "control employee" (a highly compensated employee or executive). If these and other conditions are met, the value of each one-way commute (from home to work or work to home) is fixed at $1.50. The total taxable income for the year is $3.00 multiplied by the number of round-trip commutes.
Publication 15-B, Employer's Tax Guide to Fringe Benefits: 📌 This is the principal guide for federal tax rules concerning fringe benefits. It contains the Annual Lease Value table and detailed explanations of the valuation methods.
Issue 12 – Tax Professional and Clients Must Be More Diligent with Downsized IRS
Taxpayers and practitioners must be more diligent, persistent, and organized in 2026 to navigate a "thoroughly exhausted" and understaffed IRS.
The burden has shifted to taxpayers to ensure their issues are resolved correctly.
- Be persistent and document everything.
- Plan diligently for complex issues.
- Respect tax laws.
Issue 13 – Unauthorized Use of an EFIN
As a reminder, Authorized IRS e-file Providers are required to follow the safeguarding and unauthorized use policies set forth in Publication 3112, IRS e-file Application and Participation, and Publication 1345, Authorized IRS e-file Providers of Individual Tax Returns.
Providers must protect their EFINs from unauthorized use and never share them. Prohibited actions include:
- Accepting payment for the use of an EFIN or purchasing an EFIN from someone else. (e.g., renting/leasing/selling).
- Transferring EFINs to another entity when transferring the business by sale, gift or other disposition.
- Selling software for resale (re-branding, white label, etc.), the software developer must ensure that the original purchaser does not resell the software with the original purchasers EFIN.
- Only the IRS has the authority to issue EFINs.
- An Electronic Return Originator (ERO) may only initiate the electronic submission of returns that the ERO prepared or collected from a taxpayer or an Authorized IRS e-file Provider.
- Software developers and transmitters should validate and request proof of ownership of the EFIN from the IRS e-file application.
Issue 14 – Applicable Federal Rates for March 2026, Rev. Rul. 2026-6
REV. RUL. 2026-6 TABLE 2
REV. RUL. 2026-6 TABLE 1
Applicable Federal Rates (AFR) for March 2026
| Period for Compounding | ||||
|---|---|---|---|---|
| Annual | Semiannual | Quarterly | Monthly | |
| Short-term (≤ 3 years) | ||||
| AFR | 3.59% | 3.56% | 3.54% | 3.53% |
| 110% AFR | 3.96% | 3.92% | 3.90% | 3.89% |
| 120% AFR | 4.32% | 4.27% | 4.25% | 4.23% |
| 130% AFR | 4.68% | 4.63% | 4.60% | 4.59% |
| Mid-term (> 3 years, ≤ 9 years) | ||||
| AFR | 3.93% | 3.89% | 3.87% | 3.86% |
| 110% AFR | 4.33% | 4.28% | 4.26% | 4.24% |
| 120% AFR | 4.72% | 4.67% | 4.64% | 4.63% |
| 130% AFR | 5.12% | 5.06% | 5.03% | 5.01% |
| 150% AFR | 5.93% | 5.84% | 5.80% | 5.77% |
| 175% AFR | 6.93% | 6.81% | 6.75% | 6.72% |
| Long-term (> 9 years) | ||||
| AFR | 4.72% | 4.67% | 4.64% | 4.63% |
| 110% AFR | 5.21% | 5.14% | 5.11% | 5.09% |
| 120% AFR | 5.68% | 5.60% | 5.56% | 5.54% |
| 130% AFR | 6.16% | 6.07% | 6.02% | 5.99% |
REV. RUL. 2026-6 TABLE 2
Adjusted AFR for March 2026
| Period for Compounding | ||||
|---|---|---|---|---|
| Annual | Semiannual | Quarterly | Monthly | |
| Short-term adjusted AFR | 2.72% | 2.70% | 2.69% | 2.68% |
| Mid-term adjusted AFR | 2.97% | 2.95% | 2.94% | 2.93% |
| Long-term adjusted AFR | 3.56% | 3.55% | 3.53% | 3.52% |
REV. RUL. 2026-6 TABLE 3
Rates Under Section 382 for March 2026
| Adjusted federal long-term rate for the current month | 3.58% |
| Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) | 3.58% |
REV. RUL. 2026-6 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for March 2026
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized
new buildings placed in service after July 30, 2008, shall not be less than 9%.
| Appropriate percentage for the 70% present value low-income housing credit | 8.00% |
| Appropriate percentage for the 30% present value low-income housing credit | 3.43% |
REV. RUL. 2026-6 TABLE 5
Rate Under Section 7520 for March 2026
| Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest | 4.80% |
| IRS Applicable Federal Rates page 📌 Rev. Rul. 2026-6 📌 | |
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