Washington News

In IR-2026-24, dated February 13, the Internal Revenue Service (IRS) encouraged taxpayers to use online resources on IRS.gov to avoid long wait times during one of the busiest periods of the filing season. Presidents’ Day week marks the peak of phone support as taxpayers approach the tax filing deadline.

The IRS reminded taxpayers that many common tax questions can be addressed online using the IRS’s self-service tools, which are available on demand. The IRS highlighted its “Let Us Help You” hub, which consolidates guidance on a wide range of topics and provides step-by-step support to taxpayers before, during and after filing their returns.As part of the announcement, the IRS outlined several digital services specifically intended to streamline the filing process. Taxpayers with an IRS Individual Online Account can access their tax records, including wage and income transcripts, retrieve their adjusted gross income, review and sign authorizations from tax professionals, request or view an identity protection PIN and make or schedule payments.

The IRS also encouraged taxpayers to file electronically and select direct deposit as their payment option, describing it as the fastest and safest method to receive refunds. Electronic refunds significantly reduce the risk of lost, misdirected or delayed payments. The release also referenced the federal government’s transition toward fully electronic payments under Executive Order 14247.

Taxpayers were reminded that the IRS’s online tools are designed to reduce the burden on both taxpayers and IRS call-center staff during peak demand periods. The Interactive Tax Assistant is also available which provides guided answers on filing status, taxable income, credits and other common questions.

To assist taxpayers, the IRS highlighted the availability of no-cost filing options. Eligible individuals may use IRS Free File or Free File Fillable Forms, depending on their comfort level with tax preparation and their income. In addition, qualified taxpayers seeking in-person assistance may access Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs, staffed by IRS-certified volunteers offering free basic tax preparation.

Finally, the IRS reminded taxpayers that they can easily track their refund status online through the “Where’s My Refund?” tool, which updates daily and provides status information within 24 hours of the IRS accepting an electronically filed return.

Expanded Tax Pro Accounts Released

The Internal Revenue Service (IRS) announced an improved version of its Tax Pro Account platform. The update is intended to better support tax professionals operating within tax-preparation firms, accounting practices and other entities.

The platform update introduces business-level functionality that allows a firm to digitally link its Employer Identification Number to its Centralized Authorization File (CAF) number. This will establish a formal connection between the organization and its authorization records.

Once the account is linked, designated individuals within the firm can view active client authorizations associated with the business, manage those authorizations and withdraw them when appropriate, all through the online interface rather than through paper filings. The expansion is intended to streamline internal controls for tax practices.

“This taxpayer favorable change will improve the way tax-professional businesses serve their clients,” said IRS CEO, Frank J. Bisignano. “The improvement demonstrates that the IRS continues investing in technology improvements that reduce paper submissions, streamline taxpayer interactions, and expand self-service digital options.”

This release builds on prior Tax Pro Account enhancements that enabled digital submission and management of Forms 2848 and 8821 for individual practitioners and now extends similar efficiencies to firm-level operations. It will improve transparency into who has authority to act on behalf of clients.

Art Consultant’s Promoter Penalties Affirmed

In Estate of Ehrlich v. United States; No. 1:21-cv-01020, the United States District Court for the Western District of Texas granted summary judgment in favor of the Internal Revenue Service (IRS), determining liability for penalties associated with the promotion of a tax shelter.

David Ehrlich operated Abbey Art Consultants, Inc. (Abbey Art), a business that sourced artwork internationally and facilitated donations to qualified charities by clients. Under Abbey Art’s model, clients paid an initial deposit to reserve artwork and were told they would acquire ownership sufficient to claim a fair market value charitable deduction after a holding period and appraisal process. Clients typically paid a modest deposit, often 5% to 10% of the purchase price, with the balance paid only after the donation and the appraisal documentation to substantiate the deduction was provided. The holding period often started before the client made a deposit and the total purchase price was generally 20% of the appraised “fair market value” amount.

The IRS determined that Abbey Art’s representations about ownership timing and fair market value were materially false or fraudulent. The IRS assessed penalties against Ehrlich under Section 6700, which applies to promoters of abusive tax arrangements. In March 2021, the initial penalty assessment exceeded $230,000, with an additional assessment of more than $1 million in 2023. Ehrlich paid $35,000 toward the assessment and filed a refund suit, arguing that the statements were not false and that the IRS calculation of penalties was improper. After Ehrlich’s death, his estate continued the litigation.

In its motion for summary judgment, the IRS argued that there was no genuine disputes as to material facts regarding Ehrlich’s knowledge of the falsity of the statements or reckless disregard in making the statements. Ehrlich’s estate contended that factual disputes existed and challenged the IRS’s methodology for computing the Section 6700 penalty, which is generally based on gross income derived from the activity.

The Court agreed with the IRS, finding that Ehrlich, as the sole owner and operator of Abbey Art, was sufficiently sophisticated and familiar with tax matters. The Court noted that he either knew or should have known the representations regarding ownership and valuation were improper. The Court also held that the IRS’s penalty calculations were entitled to a presumption of correctness and that the estate failed to present sufficient evidence to overcome that presumption. Thus, the Court granted summary judgment in favor of the IRS and upheld the promoter penalties under Section 6700, concluding that the art donation program involved false or misleading statements regarding ownership and valuation.

Editor’s Note: The Ehrlich ruling reinforces the compliance risks associated with noncash charitable contributions that rely on aggressive appraisals and transactional timing to support deductions.

Applicable Federal Rate of 4.6% for February: Rev. Rul. 2026-3; 2026-6 IRB 1 (15 January 2026)

The IRS has announced the Applicable Federal Rate (AFR) for February of 2026. The AFR under Sec. 7520 for the month of February is 4.6%. The rates for January of 4.6% or December of 4.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2026, pooled income funds in existence less than three tax years must use a 4.0% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”