The Tax Times: January 2026

Tuesday, January 27, 2026

Executive Order 14247: What IRS Payment Modernization Means for You and Your Clients

On September 24, 2005, we posted The IRS is Making a Major Shift: Say Goodbye to Paper Checks where we discussed The IRS will phase out paper checks for tax payments beginning September 30, 2025 and followed that up with our November 5, 2025 post Say Goodbye to Paper Checks: Get Ready for Mandatory Electronic IRS Payments in 2025 - IRS Goes Digital where we discussed a major shift is coming to how U.S. taxpayers send and receive money from the IRS.

Now the IRS has issued IR-2026-13 which describes how IRS has begun a major shift in how money moves to and from the federal government under Executive Order 14247, “Modernizing Payments To and From America’s Bank Account.” Starting with the 2026 filing season, the clear policy direction is that electronic payments and refunds will be the default, and paper checks will become the exception. For practitioners, this is less about how we file returns and more about how we get clients paid and how we help them pay.

What Is Executive Order 14247?

Executive Order 14247 directs Treasury, the IRS, and other federal agencies to transition federal payments—both incoming and outgoing—from paper-based to electronic methods, subject to existing law and limited exceptions. That mandate covers refunds, benefits, grants, vendor payments, and payments made to the government for taxes, fees, and penalties. The policy rationale is straightforward: electronic payments are faster, cheaper to process, and less vulnerable to fraud and error than paper checks and money orders.

Treasury is required to cease issuing paper checks for most federal payments by September 30, 2025, again with limited hardship and legal exceptions. Practically, this puts a clear time horizon on check-based workflows and makes it critical for taxpayers and advisors to modernize their banking and payment practices.

What Is Not Changing: Return Filing

One of the most important points from IRS guidance is what this Executive Order does not do: it does not change how taxpayers file their returns. E‑file, paper filing, and existing preparation practices remain in place, and the changes focus solely on the payment and refund rails, not on form preparation or submission. The IRS has stated that guidance for 2025 returns (filed in the 2026 filing season) will spell out the payment and refund procedures, but the core filing mechanics are unaffected.

For now, the IRS will continue to accept checks and money orders, even as it moves toward a fully electronic environment over time. The message for practitioners is to anticipate tighter electronic requirements but not to expect a sudden cutoff in traditional remittances overnight.

Refunds: Moving Away From Paper Checks

A central change is the gradual elimination of paper refund checks for most taxpayers. After September 30, 2025, the IRS generally will not issue paper refund checks where an electronic option is available, except in situations involving hardship, legal constraints, or procedural limitations. Individual taxpayers are expected to receive refunds via direct deposit, prepaid debit cards, or certain approved mobile apps if they lack traditional bank accounts.

If a taxpayer omits direct deposit information on a return, the IRS will still process the return, but the refund may be delayed. In those cases, the IRS plans to send Letter CP53E to the taxpayer’s last known address, asking for bank information or an explanation of why it cannot be provided. Taxpayers will be able to respond through their IRS Individual Online Account, where they can add or update banking details. For security reasons, IRS employees will not take direct deposit information over the phone or in person.

If the taxpayer does not respond to the CP53E letter and there are no other issues with the refund, the IRS will issue a paper check, but only after a six‑week waiting period. For practitioners, that delay is a concrete talking point when encouraging clients to provide accurate direct deposit information up front.

Payments to the IRS: Electronic First

On the payment side, the IRS is signaling a steady transition to electronic methods, even though it will continue to accept cash, checks, and money orders for now. The goal is to “fully transition” to electronic payments over time, subject to limited hardship and legal/procedural exceptions. Current electronic options include:

· IRS Direct Pay (from a bank account, with no processing fee)

· Individual Online Account and Business Tax Account payment options

· EFTPS (for those already enrolled)

· Debit or credit card and certain digital wallets

· Cash payments through the Vanilla Direct network at participating retailers, which the IRS treats as an electronic method once received into the system

A key procedural change is that EFTPS enrollment for individuals closed on October 17, 2025. Individuals who are not already enrolled will instead need to use IRS Online Account for Individuals or Direct Pay, and the IRS expects to require a full transition away from EFTPS for individuals later in 2026. For business taxpayers, Federal Tax Deposits must continue to be made electronically, and non‑electronic deposits can trigger failure‑to‑deposit penalties unless the taxpayer can show reasonable cause.

Business, Fiduciary, and International Issues

For business taxpayers, the modernization push extends to refunds as well as payments. The IRS plans to add direct deposit capability to most business return types after September 30, 2025 and will phase out paper checks for business refunds, except where electronic methods are unavailable or an applicable hardship or legal constraint exists. Payroll providers and other third‑party stakeholders will be expected to use electronic channels, with tools like the EFTPS Batch Provider system continuing to support bulk payments.

Fiduciaries—especially court‑appointed trustees and similar roles—occupy a special corner of the guidance. Where a trustee’s systems cannot handle the required electronic methods, the IRS will allow continued use of checks under the hardship/legal/procedural exception framework. However, the expectation is still that institutions and professionals will migrate toward whatever electronic solutions become available over time.

For international taxpayers, the IRS will keep existing methods in place while it builds out improved cross‑border solutions. The agency is working on partnerships with international payment providers and expanded wire and related options to improve speed, cost, and reliability for non‑U.S. accounts.

Action Steps for Practitioners

From a practice‑management standpoint, Executive Order 14247 and the related IRS FAQs translate into clear action items:

· Systematically collect and verify direct deposit information for all clients and incorporate this into intake and engagement workflows.

· For unbanked clients, proactively discuss low‑ or no‑cost bank and credit union accounts, prepaid cards, and approved apps that can receive electronic refunds.

· Encourage clients who pay balances due by check to migrate to IRS Direct Pay, Online Account payments, Business Tax Account, or other electronic options, and document that advice in your files.

· For estates, trusts, and court‑appointed fiduciaries, identify where systems can support electronic methods and where genuine hardship or legal constraints require continued use of checks, then document those constraints for future reliance.

· Educate clients that the IRS will not call, text, or email to ask for banking information and that legitimate requests (such as CP53E) will arrive by mail with instructions for responding through secure channels.

As Treasury and the IRS roll out additional technical details and system enhancements, firms that have already standardized on secure, electronic payment and refund workflows will be well‑positioned. The direction of travel is clear: fewer checks in the mail and more funds moving through verified electronic accounts—with corresponding expectations for taxpayers, practitioners, and financial institutions alike.

Have an IRS Tax Problem?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Post‑Loper Bright Tax And Other Agency Rules & Regulations Are Still Largely Being Upheld by the Courts

According to Law360, Appellate courts have mostly upheld federal agencies' interpretation of ambiguous statutes, including tax disputes, even after the U.S. Supreme Court's 2024 landmark decision that limited agency deference, a U.S. Department of Justice attorney said Thursday.

So far, the federal government has won 74 cases that challenged an agency's actions, which is roughly a 60% win rate, Lindsay Clayton, assistant director in the tax branch of the DOJ's Civil Division, said at the D.C. Bar's annual tax conference, held in Washington, D.C., and online.

The DOJ attorney previewed early findings from her analysis of circuit-level cases decided after the Supreme Court came out with its June 2024 opinion in Loper Bright Enterprises v. Raimondo. She said a more detailed report will be published in a few months in the DOJ Journal of Federal Law and Practice.

The early findings suggest that fears of a sweeping rollback of the regulatory state after justices issued the opinion in the Loper Bright case have not materialized, according to Clayton.

The government's 74 wins are comparable to the 81 cases in which courts upheld agency actions before the Loper Bright opinion, she said, citing the Cato Institute's analysis from the libertarian think tank's amicus brief filed while the case was pending. Clayton cautioned that there are still too few cases to really draw a major conclusion.

In the Loper Bright opinion, the Supreme Court majority overturned its own 1984 decision, known as the Chevron doctrine, which compelled courts in litigation to defer to an agency's interpretation of an unclear statute that Congress delegated to the agency to implement.

The outcome prompted to using other judicial review principles used in litigation, including the Skidmore deference, which the Supreme Court established in 1944. Skidmore is a less binding principle than the Chevron doctrine, which gave agencies automatic deference.

Speaking on the same panel as Clayton, Lisandra Ortiz of Miller & Chevalier Chtd. said there has not been many recent tax cases that apply factors that meet the Skidmore deference.

"We have a small pool of decided tax cases" that deal with validating agency regulations, Ortiz said. Within that, she said, "there are even fewer cases that actually have any substantive analysis of Skidmore."

Ortiz listed 2025 decisions that upheld or partly upheld agency actions in FedEx Corp. v. U.S. in a Tennessee federal court, 3M Co. v. Commissioner in the Eighth Circuit and Lissack v. Commissioner in the D.C. Circuit.

Have an IRS Tax Problem?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Tuesday, January 13, 2026

All That You Wanted to Know About Form 706NA - Part II

We previously posted All That You Wanted to Know About Form 706NA - Part I, where we discussed that in the area of estate tax compliance, many of us have prepared Form 706’s, the estate tax return for US citizens and domiciliaries. To be sure, this form is quite voluminous and can take a while to fill out but there are very few mysteries beyond schedule E; what percentage of an asset might be includable in an estate, the value of an annuity, what debts and expenses are deductible, the calculation of the marital deduction, and the generation-skipping tax computation. The Form 706NA, however, preparation of the tax return for the estate of the nonresident alien owning property in the United States, can present a more daunting task.

Based on our estate counsel Robert Blumenfeld's 32 years of experience as a senior attorney at the International office of the IRS, some of the strange and exotic problems that he discovered upon while auditing roughly 1,500 estate tax returns and preparing about 300 of the same in the last few years.

As he pointed out, one of the critical areas for each estate is to focus on is the decedent’s citizenship and domicile. To assist the IRS in reaching a conclusion, it is best to include the death certificate (required) as well as the birth certificate, passport, and any documents revealing the fact that the decedent expatriated from one country. This information may well be beneficial in avoiding an IRS examination. The problem is that once the IRS examines a tax return for one issue (i.e. citizenship or domicile), it opens the door for the IRS to examine a number of other issues that they might not have otherwise addressed. Kind of like opening Pandora's box.

After we get through the information about the decedent himself, we reach an area of the return, Part III, General Information. Most of it is pretty obvious but… The first area of major concern may be whether the decedent died intestate. Many people who have assets in several countries have country specific wills, for instance one for the United States and one for say Canada, England etc. If the decedent did die testate, one should always include the US will. If there are other wills, go through them carefully before you submit them to the IRS because they make contain data which would create questions or problems with the IRS. In the alternative, many folks have a Universal Will which covers the disposition of assets in all countries. Because of the difference of rules from country to country, such a universal will may create problems with assets passing to a surviving spouse or a charity.

Question two addresses debt obligations or other property located in the United States. One of the major problems that I saw as an auditor was that people will value the house or condominium in the United States allocating no value to the contents. In most cases this is not a big deal but in the case of an expensive property, I, as the auditor always requested (summoned if the estate did not cooperate) a copy of the insurance policy plus the floater. Generally I found nothing specific but from time to time, I found an art collection worth several million dollars, an automobile collection worth over million dollars, and an extensive collection of rare China worse close to $1 million. If the client is wealthy or as expensive real estate in the United States, obtain a copy of the insurance floater before you prepare the 706NA to avoid great embarrassment.

Question five relates to whether the decedent owned jointly held property in the United States. If the taxpayer plans to include 100% of the value of the asset, then this question should pose no problems. Two potential problems come to light: if the decedent came from a community property jurisdiction, is one half of the value of the asset excluded by operation of law in the foreign country? If one wishes to exclude a portion of an asset from a decedent in a non-community property jurisdiction, Section 2040 of the IRC places the onus again, of proving contribution on the surviving co-tenant. This can sometimes be a very difficult task, especially if the property is been held for a substantial number of years and many records/canceled checks etc. have been destroyed over the years.

Question six asks whether the decedent had ever been a US citizen. If the answer to the initial question is yes but at the time of death, the decedent is no longer a US citizen, it is necessary to include in the paperwork sent to the IRS some evidence that the decedent properly expatriated from the United States. Based on the timing, if this happened shortly before death, it could raise the issue of expatriation to avoid tax. Again, getting this information before preparing the return is a good way to avoiding embarrassment at the examination.

Have a US Estate Tax Problem?

Estate Tax Problems Require

an Experienced Estate Tax Attorney

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or Toll Free at 888-8TaxAid (888 882-9243).

Thursday, January 8, 2026

New IRS FCFC Rules: How IR-2026-03 Transforms 951B and Net CFC Tested Income

Treasury and the IRS used IR‑2026‑03 to roll out proposed regulations that overhaul how “foreign controlled foreign corporations” and “Net CFC Tested Income” work under the One, Big, Beautiful Bill Act, with big implications for U.S. owners of foreign entities starting in 2025–2026.

What IR-2026-03 does

IR‑2026‑03 announces proposed regulations implementing the new statutory framework for foreign controlled foreign corporations (FCFCs) and Net CFC Tested Income (NCTI) created by the One, Big, Beautiful Bill Act (OBBBA). The package is aimed at aligning Subpart F–style anti‑deferral rules with the 2025 legislative changes while narrowing some of the over‑breadth produced by prior attribution and GILTI regimes.

At a high level, the proposed rules translate the statute into mechanics: who is treated as a U.S. shareholder under the new regime, when a foreign corporation is an FCFC, and how NCTI inclusions are computed, allocated and reported. This is the guidance multinational groups and cross‑border closely held structures have been waiting for to model 2026 and later effective dates.

Key concepts: FCFCs and NCTI

The One, Big, Beautiful Bill Act introduced a new FCFC category to capture foreign corporations that are effectively controlled by U.S. persons through downward attribution from foreign parents or intermediaries. IR‑2026‑03’s proposed regulations define control thresholds, aggregation rules and safe harbors to distinguish targeted foreign‑parented structures from ordinary portfolio holdings.

On the income side, the Act rebrands and refines GILTI as Net CFC Tested Income, with new computational rules and interaction with foreign tax credits. The proposed regulations flesh out how to determine NCTI, allocate it among U.S. shareholders, coordinate it with existing Subpart F categories and apply new limitation rules added by OBBBA.

Effective dates and transition

Most of the OBBBA international provisions, including the FCFC and NCTI framework that IR‑2026‑03 addresses, are effective for tax years beginning after December 31, 2025. The proposed regulations generally follow those statutory effective dates but include limited transition relief and reliance rules, allowing taxpayers to adopt reasonable interpretations pending finalization.

For calendar‑year taxpayers, that means the new regime is live starting with the 2026 tax year, and modeling needs to begin now, even while rules are still technically in proposed form. The preamble also invites comments on several key definitional and computational issues, giving taxpayers a window to influence final guidance before it locks in.

Practical planning implications

For multinational groups with foreign‑parented structures, the FCFC rules will require a fresh look at ownership chains, voting and value, and prior reliance on the absence of CFC status. Structures that escaped Subpart F and GILTI purely because of foreign control may now generate NCTI inclusions and expanded information reporting for U.S. minority stakeholders.

U.S.‑parented groups face a different challenge: integrating the new NCTI computational rules with existing foreign tax credit planning, entity classification, and supply‑chain restructuring driven by the One, Big, Beautiful Bill’s broader rate and deduction changes.

For closely held clients, the message is simple but urgent: inventory all foreign entities, map constructive ownership under the new rules, and start “what‑if” modeling of NCTI now, rather than waiting for the first 2026 extension season.

Have an International IRS Tax Problem?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Sources:

1. https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-reflecting-changes-from-the-one-big-beautiful-bill-to-the-threshold-for-backup-withholding-on-certain-payments-made-through-third-parties

Retroactive QEF Relief: How Rev. Proc. 2026‑10 Helps Clean Up PFIC Nightmares

Rev. Proc. 2026‑10 gives PFIC shareholders a more structured path to request IRS consent for retroactive QEF elections via private letter ruling, while tightening documentation and “no prejudice” requirements. It is especially important for high‑net‑worth individuals and fund investors trying to escape punitive PFIC excess‑distribution treatment on legacy holdings.

A PFIC is a non-U.S. corporation that meets either the income test (at least 75% of its gross income is passive) or the asset test (at least 50% of its assets produce or are held for producing passive income). Common examples include foreign mutual funds, foreign ETFs, foreign hedge funds, and certain foreign pension plans.

What it covers

Rev. Proc. 2026‑10 supplements the general ruling procedures and focuses specifically on PLR requests for retroactive QEF elections under section 1295(b) and Treas. Reg. § 1.1295‑3(f). It applies to ruling requests received on or after January 20, 2026, and standardizes what the IRS expects in these submissions.

Key eligibility and “prejudice” test

The taxpayer must be seeking consent for a retroactive QEF election, and the IRS must find that granting relief will not prejudice the interests of the United States. The prejudice analysis looks at whether the retroactive election would effectively erase income, exploit timing rules, or undermine prior IRS examinations.

Evidence, affidavits, and protective statements

The procedure demands detailed factual statements, supporting documents, and affidavits from the shareholder and others with knowledge of the PFIC and the decision not to elect earlier. Shareholders that filed a PFIC protective statement under Treas. Reg. § 1.1295‑3(b)(2) are given a more favorable pathway if their original non‑PFIC belief was reasonable.

Multiple PFICs and user fees

Rev. Proc. 2026‑10 allows “substantially identical” retroactive QEF ruling requests to be bundled, with reduced user fees for additional substantially identical rulings in the same package. This is particularly relevant for family offices and funds holding multiple similar PFIC positions.

Practical takeaways

Advisors now have a clear checklist but a higher bar for retroactive QEF relief, making weak, lightly documented cases harder to sustain. Going forward, systematically spotting PFICs, filing protective statements, and preserving detailed investment records will be critical for clients who may someday need to rely on Rev. Proc. 2026‑10 to clean up PFIC exposure.

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