The Social Security Administration announced that Social Security benefits will increase 3.6% in 2027.

Earnings subject to Social Security: In 2027 will increase from the 2026 amount of $184,500 to $192,300.

Ref: Sirius Solutions, LLLP v. Comm’r, 2026 PTC 7 (5thCir 2026)

The Courts and IRS have been debating this topic for some time. A “truly” limited partner (or LLC member) is subject only to income tax on the net income reported to him/her on the Form K-1 from the entity. The IRS has often pushed to expand that taxation to add on self employment tax (currently 15.3%) on top of the income tax.

The Fifth Circuit withdrew its January 2026 opinion and in a 2-1 decision, substituted a new opinion defining the meaning of the term “limited partner” in IRC Sec 1402(a)(13) is a partner who plays no significant role in managing or running the business.

It’s very important that limited partners/members not be part of making management decisions for the underlying entity.

Source: IR-2026-83 (7/8/26)

This AEP program replaces the prior IRS First Time Abate (FTA) program. It’s applied automatically by the IRS computer if a penalty is due and the computer finds a prior history of filing and paying on time.

Forms that qualify:

1. Individual Form 1040
2. Partnership Form 1065
3. Corporation Form 1120/1120-S
4. Payroll Forms 940, 941, 943, 944

Who qualifies:

1. The same return type was timely filed for 3 prior years (or 12 quarters for quarterly payroll returns)
2. In those 3 years, either no penalty was assessed (except estimated tax penalty) OR the penalty was assessed and later abated for reasonable cause.
3. For a business: The IRS did not waive the failure to deposit penalty four or more times during the prior 3 years (or 12 quarters); OR, the failure to deposit penalty was not charged for EFTPS avoidance (the business paid by check and not online); OR if the IRS doesn’t apply the new AEP, the business can request penalty relief based on reasonable cause and acting in good faith under Code Sec 6664(c).

How it works:

1. The IRS won’t assess a penalty for failure to file, to pay or to make a timely deposit.
2. The IRS will send a notice explaining that they applied AEP relief
3. The taxpayer WON’T need to reply to the notice. HOWEVER, the taxpayer is on notice that the AEP won’t be applied again (within the three year period).

Types of penalties impacted:

1. Failure to file tax returns
2. Failure to file partnership or S corporation returns.
3. Failure to pay the tax shown on the return by the due date.
4. Failure to deposit taxes in the correct amount or manner (e.g. payroll taxes paid through the EFTPS system)

Practical application: We are hopeful that the IRS computer system is now more capable and can implement this program seamlessly. Under the old FTA system, the abatement was seldom offered automatically and written requests for abatement and application of the FTA were common.

UPDATE 9/1/2026: We’re now seeing penalty abatement letters from the IRS regarding individual 2025 filings. In one case, the penalty was one dollar. The IRS sent a letter waiving that… HOWEVER due to the new Trump executive order, the IRS can’t issue the refund without a bank account number (as they can no longer send checks). The client has to login and provide bank information in order to get their dollar refund. Clearly, the mailings alone cost more than that!

Source: IRS Announcement 2026-11

Due to recent increases in fuel costs, the IRS is raising its standard mileage rate from 72.5 cents per mile.

NEW RATE: 76 cents per mile

EFFECTIVE: JULY 1, 2026

Source: CA Senate Bill 122; signed June 29, 2026 EFFECTIVE 1/1/2027

CA has long exempted digital software sales where no personal property was transferred from sales tax. This all changes effective 1/1/2027. On 1/1/2027, digital software downloads will be subject to CA sales tax at the normal rate for the seller’s jurisdiction.

Exemptions:

• Resale sales to other vendors with proof of resale permit from the vendor.
• Out-of-state sales where end user could be proven to be out-of-state.
• Specific digital transfer exclusions include music, video games, books, movies and digital visual works (e.g. photographs)

Without proof of an exemption, the assumption is that the sale is subject to sales tax.

Many software development companies will now have to apply for a resale permit with CDTFA and remit sales tax collected monthly, quarterly or annually. (The CDTFA sets the timing).

Ref: One Big Beautiful Bill Act

Trump accounts were introduced with the OBBBA. Contributions to these accounts can begin July 4, 2026.

Overall: These are designed to be A RETIREMENT ACCOUNT for the child, started at an early age. If you’re saving for college education we would recommend a 529 account as a better alternative.

Who can open one: The guardian, parent or grandparent (in that order) for any child under age 18. The child must have an active Social Security Number.

Annual contribution: Maximum of $5,000 from parents, grandparents or an employer per year.

Children born in 2025 – 2028: The government will jump start the account with a gift of $1,000 “seed money.”

How to open: Go to Trumpaccounts.gov and complete the simple application for any child under age 18. For children born from 2025 – 2028, be sure to elect to have the government fund the account with the seed money. The government will then send you detailed information on the account.

Other information: Like an IRA, the account grows tax deferred until taken out (when earnings are taxed). The contributions are NOT TAX DEDUCTIBLE. Investment types are highly restricted to select index funds until the December 31 of the year when the child turns 17. Long term, these act a lot like a non-deductible traditional IRA account.

ANNUAL FUNDING DEADLINE: The funding deadline is December 31 each year (unlike IRAs which have until April 15 of the following year).

Ref: One Big Beautiful Bill Act

Form 1099-NEC or 1099-Misc: Payments made by businesses requiring reporting on these forms moves from $600 per year to $2,000 per year per recipient. These are for payments starting January 1. 2026.

Source: IR-2025-94: Text taken from Spidell article January 2026.

Paper refund checks for individual taxpayers began phasing out on September 30, 2025. (IR-2025-94) The phaseout of refund checks for individual taxpayers is the first step in implementing President Trump’s Executive Order 14274, issued on March 25, 2025, which directed the U.S. Treasury to stop issuing paper checks by September 30, 2025, as well as mandating that all payments to the federal government be made electronically “as soon as practicable.”

CLIENTS SHOULD BRING TO THE TAX APPOINTMENT: BANK NAME, ROUTING NUMBER AND ACCOUNT NUMBER. (Be sure of these numbers as errors delay refunds for many months).

For taxpayers who are unable to receive direct deposits to a bank account, other options such as prepaid debit cards, digital wallets, or limited exceptions to the paper check prohibition are available. However, no additional guidance has been provided yet as to how these alternatives may be requested.

To date, there are no changes being made to how payments to the U.S. Treasury should be made. Taxpayers should continue to use existing payment options until further notice. According to the IRS, additional guidance and information for filing 2025 taxes will be issued prior to the 2026 filing season.

Ref: One Big Beautiful Bill IRS Notice 2025-57.

When: Tax years 2025 through 2028

What: Interest deduction on individual return for up to $10,000 on vehicle interest for vehicles manufactured/assembled in the United States.

Phase out: This is phased out for taxpayers with adjusted gross income over $100,000 ($200,000 on joint return).

Specifics:

1. Must be passenger vehicles with original use commencing with the taxpayer. Does not apply to used and leased vehicles.
2. Must be a car, minivan, van, SUV, pickup truck or motorcycle.
3. Must have a gross vehicle weight under 14,000 pounds.

Forms:

1. 2025: The lender can provide any proof of the interest including a monthly or annual statement.
2. 2026 – 2028: The lender must provide a Form 1098-VLI to the owner for use on the tax return.

Other: This is a “below the line” deduction available to any individual, subject to the above adjusted gross income limitations.

VIN Number: Vehicles starting with a 1, 4 or 5 were assembled in the USA.

Source: IRS Fact Sheet 2025-08; One Big Beautiful Bill (OBBB)

Form 1099-K is issued by banks, credit card clearing houses and others such as PayPal and Zelle to recipients of funds clearing through their organization which are deemed to be business-related.

Under OBBB, the threshold for issuance by a third party settlement organization is now transactions to a payee exceeding $20,000 or 200 transactions in a year.