Week in Tax — July 10, 2026: COVID Penalty Refund Window Closes Today
Five items from the past week in federal tax — July 4 through July 10, 2026.
From the Desk
First full working week after the holiday, and Washington didn’t ease back in. Five items this week, and three of them are about IRS processes actually getting faster or fairer:
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.
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Educational analysis for licensed practitioners only. Not legal or tax advice.