Here’s the deal: the last thirty days have been a genuine avalanche of federal tax activity, most of it Treasury and the IRS scrambling to operationalize the OBBB (signed July 4, 2025, in case you’d blocked that date out like a bad first date). At the same time, the estate and gift tax world is quietly settling into its new $15 million per person reality. And because tax season never sleeps and neither, apparently, does human creativity when it comes to avoiding an IRS bill, we got some genuinely bizarre and delightful stories this month too. Let’s get into all of it.
The Big Picture (Read This Even If You Skim Everything Else)
- OBBB implementation is in full sprint mode. Treasury and the IRS issued a wave of notices, proposed regulations, and updated FAQs in August covering paid family and medical leave credits, the overtime deduction, backup withholding, business interest expense, Trump Accounts, and more.
- The $15 million estate and gift tax exemption ($30 million for married couples) is now permanent law , and the IRS continues to show taxpayer-friendly flexibility on late portability elections, so more planning runway than we’ve had in years.
- The IRS is done being patient with syndicated conservation easements. A new dedicated office, an ended settlement initiative, and two big appellate losses for taxpayers in August tell you exactly where this is headed.
- Interest rates on unpaid tax stayed at 7% for individuals into Q4 2026, so at least that headache didn’t get worse.
- And yes, a Los Angeles comedian, a serial-litigant attorney, and a pizza-obsessed CPA all made tax news this month. Stick around for those. They’re too good to skip.
OBBBA’s Guidance Tsunami: What Actually Changed for You and Your Business
Let’s be honest, keeping up with OBBB guidance has felt like trying to drink from a fire hose while riding a unicycle. Here’s the condensed version of what landed in the last thirty days that actually matters to entrepreneurs and business owners.
Backup withholding got real. On August 7, Treasury and the IRS finalized regulations under Section 3406 implementing OBBB’s new backup withholding thresholds for third-party settlement organizations (think payment apps and marketplaces). The rules, effective August 10, apply the $20,000/200-transaction de minimis threshold and multi-year lookback retroactively to payments made in calendar years beginning after December 31, 2024. If you run a business that gets paid through third-party platforms, this is a “check your 1099-K situation now, not in March” item.
The overtime deduction FAQs got a major update. On August 6, the IRS refreshed the Section 225 “no tax on overtime” guidance (Fact Sheet 2026-13), clarifying withholding mechanics, requiring qualified overtime to be separately reported on Form W-2 using Box 12 Code TT, and confirming that employers cannot reduce withholding for the deduction unless the employee submits an updated Form W-4. If you have hourly employees clocking overtime, your payroll provider needs to have this dialed in before year-end W-2 prep.
The paid family and medical leave credit under Section 45S got interim guidance. Notice 2026-28, issued August 5, lets employers calculate the now-permanent credit using either qualifying wages paid during leave or premiums for qualifying insurance, and addresses eligibility rules for employees who customarily work at least 20 hours a week. This credit just went from “nice bonus” to “permanent planning tool,” which is exactly the kind of quiet, HUGE development that gets buried under louder headlines.
Business interest expense (Section 163(j)) guidance got a refresh. On August 20, the IRS replaced its December 2025 FAQs with Fact Sheet 2026-14, updating the rules limiting business interest deductions to business interest income plus 30% of adjusted taxable income, plus floor plan financing interest. If you’re running leveraged growth or considering an acquisition, this deserves a fresh look with your advisor, not a “we handled that in 2018 and forgot about it” shrug.
Trump Accounts got both a nondiscrimination proposal and investment guardrails. On August 11, Treasury proposed regulations (REG-101355-26) addressing nondiscrimination rules for Section 128 Trump Account contributions (up to $2,500 per employee, tax-free) and the related Section 129 dependent care assistance expansion (up to $7,500). Then, on August 20, Treasury announced forthcoming rules limiting Trump Account investments during the growth period to low-fee, broadly diversified index funds and ETFs. Translation: this is shaping up to be a real employee-benefit lever for business owners, not just a headline from last summer.
The Saver’s Match program and retirement rollovers got standardization. Notice 2026-48 (August 7) announced intent to propose regulations for the federal Saver’s Match beginning in 2027, and Notice 2026-49 (August 12) rolled out sample forms to simplify direct rollovers between plans and IRAs.
And in disaster relief, Congress finally made things permanent. The Doug LaMalfa Federal Disaster Tax Relief Certainty Act (H.R. 5366) cleared the Senate on August 7 and now sits on the President’s desk. It codifies the enhanced personal casualty loss deduction (usable even by non-itemizers, with the per-event floor raised from $100 to $500) and creates new IRC Section 139M excluding qualified wildfire relief payments from gross income through 2026. If you or a client have ever been on the wrong end of a hurricane, wildfire, or ice storm, this one’s worth flagging.
One piece of genuinely boring good news: the IRS announced on August 21 that interest rates on both overpayments and underpayments hold steady at 7% for individuals going into Q4 2026. Not exciting, but in a world of constant change, I’ll take “no news” as a small mercy.
Estate and Gift Tax: The $15 Million Party Just Keeps Rolling
Here’s where I get genuinely enthusiastic, because this is the kind of durable planning window we haven’t had since before I owned a fax machine (RIP).
The OBBB permanently set the basic exclusion amount at $15 million per individual ( $30 million for married couples ) effective January 1, 2026, with no sunset and ongoing inflation indexing off a 2025 base year. The annual gift tax exclusion holds at $19,000 per recipient ($38,000 with gift-splitting). For years, every estate plan I built had an asterisk next to it: “subject to change when the TCJA sunsets.” That asterisk is gone. Permanently. This is HUGE, and if you haven’t revisited your estate plan since the bill passed, “ciao, let’s talk”.
Two other estate-specific items from the last thirty days worth your attention:
The IRS keeps granting late portability relief, and generously. Two private letter rulings issued in August (PLR 202632013 on August 7 and PLR 202633006 shortly after) each granted a surviving spouse’s estate 120 additional days to file Form 706 and elect portability of a deceased spousal unused exclusion (DSUE) amount. The lesson hasn’t changed in fifteen years: portability is never automatic, the nine-month deadline is real, but the IRS’s Section 9100 relief valve is still open for executors who miss it in good faith. Don’t rely on it. But know it’s there.
Trump Accounts got a gift tax safe harbor for the grandkids’ contributions. Revenue Procedure 2026-25, issued June 29, spells out how contributions to a minor’s Trump Account (capped at $5,000 annually) qualify as completed gifts eligible for the annual exclusion rather than being treated as gifts of a “future interest,” as long as your total gifts to that beneficiary for the year don’t exceed $19,000 and you’re not otherwise required to file a gift tax return. If Trump Accounts are part of your multigenerational gifting strategy, this safe harbor is the fine print you actually need to follow.
The IRS Says “Basta!” to Conservation Easement Games
Now for a story that’s technically a federal tax development but also happens to be the closest thing to a courtroom drama Netflix could option this month.
In August, the IRS created a brand-new Office of Conservation Easements to centralize enforcement strategy and simultaneously pulled the plug on the uniform settlement initiative it launched back in May for syndicated conservation easement deals. Translation: the era of a standardized “pay a 10% penalty and walk away” deal is over, and the agency is doubling down on individualized scrutiny. However, more importantly it gives the IRS the flexibility to individually negotiate settlements based on the specific facts of each case. This should hopefully help clear a lot of these cases.
Two rulings landed in the same window that show exactly why. In Malibu Valley Land, LLC v. Commissioner , the Tax Court let the taxpayer keep its charitable deduction for donative intent on a 298-acre Santa Monica Mountains easement but slashed the claimed value from $32.075 million down to roughly $19.7 million after splitting the property into two zoning-driven valuation zones. Meanwhile, in Mill Road 36 Henry, LLC v. Commissioner , the Eleventh Circuit affirmed the IRS’s position wholesale: a partnership claimed an $8.9 million deduction for a Georgia easement that the Tax Court valued at just $900,000 , a discrepancy so large (over 200%) that the 40% gross valuation misstatement penalty automatically applied, on top of limiting the deduction to a basis of only $416,563 because the land had been held as inventory.
The Bizarre, the Fun, and the “You Can’t Make This Up” Files
The tax world always gives us a gift that has nothing to do with basis or depreciation and everything to do with pure human comedy. August delivered in spades.
The comedian and the $8.7 million. Comedian Carlos Mencia (born Ned Arnel Holness) is fighting 12 felony tax evasion counts filed by LA County DA Nathan Hochman’s brand-new Business Tax Fraud Unit, alleging he failed to report $8.7 million in personal and corporate income between 2019 and 2024, racking up over $300,000 in unpaid California tax. At his August 14 hearing, he showed up in a “Super Funny” T-shirt, watched the Spain-France World Cup match from the courthouse gallery while waiting for his case to be called, and told reporters, “All I did was fail to pay my taxes”. Friends, “I just didn’t pay” is not, in fact, a defense to twelve felony charges, but I appreciate the honesty. He’s since gotten court approval to sell his $4.5 million Encino mansion to help cover the tab. This is the kind of thing that happens when 78 demand letters from the Franchise Tax Board go unanswered.
The attorney who really, really didn’t want to pay. In Percy Squire Co LLC v. Commissioner (T.C. Memo. 2026-112, decided in August), the Tax Court hit attorney Percy Squire, an admitted member of the Tax Court bar no less, with a $10,000 penalty under Section 6673 for filing a frivolous Collection Due Process appeal, his seventh Tax Court petition in fifteen years, complete with claims involving the Telecommunications Act of 1996 and undisclosed cryptocurrency holdings. The court warned that a future repeat could cost him the full $25,000 max. Bottom line: the Tax Court has a memory, and “delay, recycle arguments, repeat” is not a strategy, even if you’re the one wearing the bar card.
The IRS is warning you about a fake portal. In late August, the IRS flagged a phishing scheme mailing physical letters directing digital asset holders to a bogus “Digital Asset Compliance Portal” designed to mimic IRS.gov and harvest personal information. If you hold crypto and get a letter that smells even slightly off, call your CPA before you click anything. The real IRS does not need you to “verify your wallet” on a website that isn’t irs.gov .
And finally, the pizza tracker heard ’round the accounting world. CPA Nicole Davis built a “Tax Return Pizza Tracker” (inspired, naturally, by watching her actual pizza delivery status bar) to give clients real-time updates on where their return sits in the pipeline. It caught on so widely that other software vendors started copying the concept, so this August she trademarked the name and announced plans for a companion app. As a fellow tax and tech geek, I salute anyone who makes “your return is in the oven” a legitimate client communication strategy.
What You Need to Do
- Payroll and HR: Confirm your payroll provider has implemented the updated overtime FAQ requirements (Box 12 Code TT reporting) and Section 45S PFML credit mechanics before year-end.
- Platform-based revenue: If you receive payments through apps or marketplaces, review your 1099-K exposure under the finalized $20,000/200-transaction backup withholding thresholds now, not in April.
- Leverage and M&A plans: Revisit your Section 163(j) business interest position under the new Fact Sheet 2026-14, especially if you’re contemplating an acquisition or a leveraged recap.
- Estate plans: If your documents still assume a shrinking exemption or a 2026 sunset, get them updated to reflect the permanent $15 million/$30 million exemption. This is a “call us this quarter” item, not a “someday” item.
- Portability: If you’re an executor who missed the nine-month Form 706 deadline for a deceased spouse, don’t assume it’s too late. Talk to us about Section 9100 relief before you write it off.
- Conservation easements: If you invested in syndicated conservation easements keep your eyes open for movement in getting these matters resolved. The IRS’s new dedicated enforcement office should help us get these matters finally closed.
- Digital assets: Treat any unsolicited letter about a “Digital Asset Compliance Portal” as fraudulent until proven otherwise.
Grazie Mille, Ciao
Friends, that’s your thirty days. Between OBBB implementation moving at warp speed, a permanently generous estate tax exemption, an IRS that’s clearly ready to close conservation easement casess, and enough real-life courtroom theater to fill a Broadway season, this was not a quiet month in tax. And it won’t be the last one. If any of this touches your business, your estate plan, or your general curiosity about how the sausage (or the pizza) gets made, reach out to us at [email protected]. We’d love to talk strategy, not just compliance.
Grazie Mille, Ciao!
