2026 Mid-Year
As we move towards the second half of 2026, several federal and state tax developments may affect both individuals and businesses. Below are four important items we believe many of our clients should review, including a potential IRS penalty refund opportunity, IRS online accounts, new Trump Accounts for children, and North Carolina tax law changes.
1. Set Up Your IRS Online Account
If you do not already have an IRS online account, we strongly encourage you to create one. The IRS has significantly expanded its online services for both individuals and businesses. An online account provides direct access to important tax information and can save considerable time when addressing IRS matters, including Power of Attorney authorizations and new programs such as Trump Accounts.
Individuals can:
View tax account balances
Access tax return transcripts and wage and income records
Confirm estimated tax payments and other payments made
Review notices issued by the IRS
Authorize Powers of Attorney electronically
Monitor refund and account activity
Businesses can:
View account balances and payment history
Access business tax records and transcripts
Review notices and correspondence
Manage authorizations and account information
How to get started:
Visit www.irs.gov/account and select the Individual or Business Online Account option.
Complete identity verification through ID.me.
Once established, download and retain copies of your tax transcripts and account records.
2. COVID-Era IRS Penalty Refund Opportunity
⚠ Deadline: July 10, 2026
A recent federal court decision has created a potential refund opportunity for taxpayers who were assessed IRS penalties during the COVID-19 federal disaster period. The issue stems from Kwong v. United States, a taxpayer-favorable court decision that interpreted federal disaster relief provisions in a manner that may invalidate certain late-filing and late-payment penalties assessed between January 20, 2020 and July 10, 2023. The National Taxpayer Advocate has indicated that tens of millions of taxpayers may potentially be affected.
Important: This issue is not yet fully resolved. The IRS does not agree with the court’s interpretation and continues to challenge the decision. Refunds are not guaranteed. The primary purpose of filing now is to preserve your rights before the statute of limitations expires. If the courts ultimately uphold the taxpayer-favorable interpretation, taxpayers who filed timely claims may be entitled to refunds or abatements that would otherwise be lost.
Who should review their records?
You may be affected if you:
Filed a tax return late between January 20, 2020, and July 10, 2023
Paid penalties for filing or paying late during that period
Still owe penalties assessed during that period
Filed certain international information returns late
This issue may affect individuals, businesses, trusts, estates, and other taxpayers.
How to determine whether you may be eligible:
The easiest way to begin is by reviewing your IRS account transcripts through your IRS online account. When reviewing your transcripts, look for:
Failure-to-file penalties
Failure-to-pay penalties
Estimated tax penalties
Interest charged on those penalties
Pay particular attention to penalty assessments dated between January 20, 2020 and July 10, 2023. You do not need to understand every line on the transcript. Simply identifying penalties and interest assessed during the relevant period can help determine whether additional review is worthwhile.
When to contact our office: If you identify penalties and related interest assessed during the relevant period and the potential refund exceeds $1,000, we would be happy to help evaluate whether filing a protective claim is appropriate. Because preparing these claims involves professional fees and the outcome remains uncertain, we generally believe the opportunity is most worthwhile when the potential refund is meaningful.
3. Trump Accounts – A New Savings Opportunity for Children
★ $1,000 federal seed contribution available for eligible children
The One Big Beautiful Bill Act created a new tax-favored savings vehicle known as a Trump Account. These accounts are designed to encourage long-term savings for children and function similarly to traditional IRAs, with special contribution and distribution rules.
Key features:
May be established for children under age 18
Contributions grow on a tax-deferred basis
Family members, employers, charitable organizations, and government entities may contribute
Accounts automatically convert to traditional IRAs when the child reaches age 18
Federal seed contribution:
Perhaps the most attractive feature is that children born between 2025 and 2028 are eligible for a one-time $1,000 federal contribution — making these accounts particularly attractive for families with young children.
Getting started: Visit www.irs.gov/trumpaccounts or file Form 4547, Trump Account Election(s), through your IRS online account. The Treasury Department has also launched a dedicated portal and mobile app after the election has been processed.
For many families, Trump Accounts may become an important component of a child’s long-term financial planning. Please contact our office if you would like assistance determining eligibility or understanding how a Trump Account fits within your overall planning strategy.
4. North Carolina Tax Law Update
North Carolina legislators continue to work through legislation updating the state’s conformity with the Internal Revenue Code and recent federal tax law changes.
One positive development is the proposed update of North Carolina’s conformity date to July 5, 2025. This should eliminate some uncertainty surrounding North Carolina depreciation adjustments and provide greater consistency between federal and state tax reporting.
R&D expenditures: While the federal One Big Beautiful Bill Act restored the ability to immediately deduct certain domestic R&D costs, North Carolina is expected to continue requiring those costs to be recovered over five years for state tax purposes. This difference may affect business clients with significant research and development activities.
We will continue monitoring legislative developments and provide additional updates once conformity legislation is finalized.
As always, if you have questions about any of these developments or would like assistance evaluating how they affect your particular situation, please contact our office. We appreciate the opportunity to serve as your trusted tax advisors and look forward to helping you navigate these and other tax developments throughout the year.
