• A refund window closing today,

• A new e-file shortcut for it, and

• A penalty-relief program that’s about to stop requiring taxpayers to ask for it

Item one has a deadline that expires today. Read that one first, then the rest in the four minutes you’ve got before the next call.
— Forrest

Five items from the past week in federal tax — July 3 through July 10, 2026.

1. COVID Penalty Refund Window Closes Today — IRS Adds a Faster Way to Claim It

In November 2025, the Court of Federal Claims held in Kwong v. United States that IRC §7508A(d) automatically postponed federal tax deadlines for the entire COVID-19 disaster period — January 20, 2020 through July 10, 2023 — meaning many failure-to-file, failure-to-pay, and underpayment-interest charges assessed in that window may have been improper.

The ruling isn’t final (IRS appeal brief due July 20), but the refund-claim clock isn’t waiting on it. This week the IRS also opened a faster path: individuals with an IRS Online Account can now e-file Form 843 for a Kwong-related claim by writing “Kwong vs. United States” across the top; businesses still have to paper-file.

What this means for you: For most affected taxpayers, the IRC §6511 protective-claim window closes today, July 10 — pull the transcript and file Form 843 now, and confirm your client has an IRS Online Account before promising the faster e-file route, since businesses don’t get it.

Source: Kwong v. United States, 179 Fed. Cl. 382 (2025); Journal of Accountancy (AICPA), July 2026
Read more → https://www.journalofaccountancy.com/news/2026/jul/irs-adds-online-option-details-for-kwong-related-refund-claims/

2. IRS Finalizes Section 1035 Fix: Retroactive Relief Now Available

Treasury Decision 10052, effective July 9, 2026, closes an inadvertent trap the 2019 regulations created under the Section 101 transfer-for-value rules, which had threatened to tax death benefits on ordinary Section 1035 life-insurance exchanges. The rule also adds a 5%-of-gross-assets de minimis exception for corporate-owned life insurance in reorganizations. Taxpayers may elect to apply the fix retroactively to exchanges and acquisitions after December 31, 2017.

What this means for you: Review any client Section 1035 exchange since 2017 for transfer-for-value exposure and consider the retroactive election to close it out.

Source: T.D. 10052 (July 9, 2026)
Read more → https://www.currentfederaltaxdevelopments.com/blog/2026/7/8/irs-finalizes-section-1035-exchange-and-corporate-reorganization-regulations-key-takeaways-for-tax-practitioners

3. Security Summit Kicks Off Summer Series: WISP Still the Baseline Ask

IR-2026-81 announced the five-week “Protect Your Clients; Protect Yourself” campaign, running alongside the 2026 Nationwide Tax Forums. IRS Stakeholder Liaisons logged nearly 200 practitioner data incidents this spring alone, affecting up to 180,000 clients combined. Every year the campaign starts in the same place: confirming practitioners actually have a Written Information Security Plan, not just know the phrase.

What this means for you: No current WISP? IRS Publication 5708 is the fastest path to one — this is a Circular 230 baseline, not optional paperwork.

Source: IR-2026-81, July 7, 2026
Read more → https://www.irs.gov/newsroom/irs-security-summit-launch-summer-series-to-help-tax-pros-protect-clients-from-identity-theft

4. Practitioner Watch: New Orleans Tax Forum Registration Closes July 21

The second of five 2026 Nationwide Tax Forums runs August 4–6 in New Orleans. IR-2026-81 confirms registration deadlines are approaching and several forums will sell out; standard registration for New Orleans closes July 21 at 5:00 p.m. ET, after which only costlier on-site registration remains.

What this means for you: If a Forum is part of your CPE plan this year, register before July 21 — don’t pay the on-site premium for waiting.

Source: IR-2026-81, July 7, 2026
Read more → https://www.irs.gov/newsroom/irs-security-summit-launch-summer-series-to-help-tax-pros-protect-clients-from-identity-theft

5. IRS Replaces First-Time Abatement With Automatic Penalty Relief

IR-2026-83 (July 8, 2026) announced Automatic Exemption from Penalty (AEP), a systemic relief program phasing in this summer that fully replaces First-Time Abatement for returns with original due dates on or after January 1, 2027.

Clients with a clean three-year compliance history (12 consecutive quarters for quarterly filers) get failure-to-file, failure-to-pay, and failure-to-deposit penalties waived automatically — no request required. During the transition, some qualifying taxpayers may still get a penalty notice in error.

What this means for you: Don’t assume a penalty notice is correct for a client with three years of clean compliance — pull the account transcript first. If AEP didn’t apply and they qualify, First-Time Abatement is still available by request during the transition.

Source: IR-2026-83, July 8, 2026
Read more → https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers

Next Tuesday: Form 2848 vs. Form 8821 — when to use each, and what goes wrong when you guess.

FOUNDING SUBSCRIBER COHORT — Closes July 31, 2026

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Educational analysis for licensed practitioners only. Not legal or tax advice.

1. IRS Eliminates Gift Tax Filing Requirement for Most Trump Account Contributions

Treasury and the IRS issued Revenue Procedure 2026-25 on June 29, creating a safe harbor that treats qualifying Trump Account contributions as completed gifts eligible for the annual exclusion — not gifts of a future interest, which had been the open question since Section 530A accounts launched. If a donor’s only taxable gifts in a year are cash contributions to Trump Accounts under the $19,000 per-beneficiary annual exclusion, no Form 709 is required. With nearly six million Trump Account elections already filed, this removes a real compliance burden for grandparents and other donors making contributions on behalf of minors.

What this means for you: Pull your client list for anyone who funded a Trump Account in 2026 expecting to file Form 709 — tell them this week that they likely don’t need to, provided they meet the four safe-harbor conditions in Section 4.02 of the revenue procedure.

Source: Rev. Proc. 2026-25; IR-2026-80, June 29, 2026

2. IRS Merges Return Preparer Office and OPR Into New Tax Professional Management Office

Effective June 28, the IRS folded the Return Preparer Office (PTINs, AFSP, CE providers) and the Office of Professional Responsibility (EA/CPA/attorney discipline under Circular 230) into a single Tax Professional Management Office, led by Chris Pleffner. The IRS says the missions of RPO and OPR remain intact and will continue operating independently within the new structure — this is an organizational merger, not a policy change to credentialing or discipline standards.

What this means for you: No action needed yet, but watch for changes to where PTIN renewal, CE provider approval, or OPR complaint correspondence gets routed — a structural merger like this often means new mailing addresses or portal logins within the next few months.

Source: IRS Statement on TPMO, June 28, 2026

3. IRS Updates Collection Financial Standards — Effective Now for Every Open OIC and Installment Agreement

The IRS released its 2026 Allowable Living Expense standards on June 29, effective immediately for all financial analyses conducted on or after that date. National Standards for a one-person household rose to $867/month (food, housekeeping, apparel, personal care, and miscellaneous combined), with corresponding increases to local housing/utilities and transportation figures. These standards drive every Offer in Compromise Reasonable Collection Potential calculation, Currently Not Collectible determination, and installment agreement payment amount.

What this means for you: Any OIC, CNC request, or installment agreement proposal you’re preparing or have pending needs to be recalculated against the June 29, 2026 standards before submission — using stale 2025 figures on a Form 433-A or 433-F filed now risks rejection or a miscalculated ability-to-pay figure.

Source: IRS Collection Financial Standards, effective June 29, 2026

4. IRS Issues Transitional Guidance on Qualified Opportunity Zones Under OBBBA

The IRS released Notice 2026-40, providing transitional guidance on Qualified Opportunity Zones as the program shifts from its original fixed-sunset structure to the permanent, rolling-designation framework created by OBBBA Section 70421. The notice confirms that gain deferred under the original OZ program must be recognized on December 31, 2026 and cannot be re-deferred into a new fund, while also creating transition relief — including a working capital safe harbor — for existing Qualified Opportunity Funds and QOZ businesses operating in zones designated before the new law.

What this means for you: If any client holds a pre-OBBBA QOF investment, the December 31, 2026 mandatory gain recognition date needs to be on their radar now, not in November — and any client running a QOZ business who wants to keep acquiring property in a previously designated zone after 2026 needs a written working capital plan adopted by December 31, 2026.

Source: Notice 2026-40 (IRB 2026-28, July 6, 2026)

5. ⚠ PRACTITIONER WATCH: Form 5500 Deadline for Calendar-Year Retirement Plans

Form 5500 for calendar-year retirement plans is due July 31, 2026. This deadline catches small-firm clients off guard every year because it falls outside the usual April/September/October filing rhythm — and unlike individual returns, there’s no automatic extension. A separate Form 5558 must be filed by July 31 to push the deadline to October 15.

What this means for you: If any client maintains a calendar-year 401(k), profit-sharing, or other ERISA retirement plan, confirm now whether the Form 5500 is being handled in-house, by a TPA, or needs your attention — and if more time is needed, file Form 5558 before July 31, not after.

Source: ERISA Title I; IRS Form 5500 instructions

Next Tuesday, July 7: A deep dive into the OBBBA — every provision that actually affects your clients, in plain English, straight from primary source.

FOUNDING SUBSCRIBER COHORT — Closes July 31, 2026

20 founding subscriber spots. $199/year. Includes monthly 30-minute group Q&A with Forrest Baumhover, CFP, EA.

→ federaltaxdesk.substack.com/subscribe

Forward this to a colleague in your practice. The Federal Tax Desk is built for practitioners — referrals from practitioners are the only growth strategy we need.

The Federal Tax Desk │ Forrest Baumhover, CFP, EA │ federaltaxdesk.substack.com

Educational analysis for licensed practitioners only. Not legal or tax advice.