Tax Compliance & Tax Controversy Updates: Innocent Spouse Relief, Partnership Reporting & Law Firm Cybersecurity
The legal and tax landscape is constantly shifting, particularly in areas involving tax compliance, tax controversy, reporting obligations, and data security. Sometimes the biggest developments come through major legislation. Other times, they emerge through procedural IRS changes, court decisions, evolving digital asset guidance, or questions about cybersecurity and internal controls.
Here are a few recent developments worth watching and why they may matter to businesses, taxpayers, professionals, and advisors.
IRS Finalizes Rules Easing Partnership Interest Sales Reporting
Who this may affect: Partnerships, investors, business owners, and tax professionals handling partnership transactions.
The IRS recently issued final regulations resolving the requirement that partnerships furnish IRC § 751 gain and loss information to selling partners by January 31.
Under the finalized rules, the new deadline now matches the partnership’s Schedule K-1 deadline.
While that may sound technical, timing issues around partnership reporting are rarely minor for those dealing with partnership sales, compliance obligations, and tax filings. Aligning these deadlines may ease some administrative pressure and reduce timing complications during an already busy reporting season.
This change also follows prior IRS temporary relief from penalties for failures to timely furnish Part IV information for exchanges occurring in 2023 and 2024 through Notice 2024-19 and Notice 2025-2.
For businesses, investors, and advisors focused on tax compliance, this is one of those procedural updates that is easy to overlook, but could make partnership reporting and compliance obligations a little more manageable in practice.
More Avenues for Relief? 4th Circuit Revives Innocent Spouse Bid
Who this may affect: Married or formerly married taxpayers, surviving spouses, and advisors evaluating tax relief options.
More relief on the horizon? A recent federal appeals court decision may have opened an interesting discussion around innocent spouse relief.
In LaRosa v. Commissioner, 2026 WL 1378669 (5/18/26), the Fourth Circuit revived a widow’s innocent spouse claim relating to a tax debt, ruling—almost decades later—that an erroneously refunded interest payment created an “unpaid tax” potentially eligible for such relief.
Judge Toby Heytens, writing for the panel, focused on IRC § 6601(e)(1), which states that interest “shall be assessed, collected, and paid in the same manner as taxes,” and that references to “tax” in the Internal Revenue Code “shall be deemed also to refer to interest imposed by this section on such tax.”
For non-tax practitioners and taxpayers alike, this is a reminder that statutory wording matters, and sometimes deeply technical provisions can meaningfully affect who may qualify for relief.
This does not mean innocent spouse relief suddenly expands in every case. But for taxpayers dealing with joint liabilities, surviving spouses, and practitioners navigating complex tax controversy matters, it is a development worth watching.
Digital Currency: A New Test for Government Financial Reporting?
Who this may affect: State and local governments, public agencies, accountants, auditors, and organizations following cryptocurrency regulation.
Digital assets continue to push traditional reporting frameworks into new territory.
The Governmental Accounting Standards Board (GASB) has begun examining whether state and local governments may need additional guidance for reporting cryptocurrencies, stablecoins, and other digital assets—including how, and whether, public agencies should report crypto-related activity in their financial statements.
Questions around digital asset reporting are no longer limited to private companies or crypto-focused organizations. As digital currencies become more integrated into broader financial systems, public agencies and governmental entities are increasingly being pulled into the conversation.
Issues involving valuation, disclosure, accounting treatment, governance, and broader tax compliance considerations continue to evolve. Any future guidance from GASB could shape how government entities approach digital asset reporting going forward.
Lawyers: How Secure Is Your Data? Insider Trading, Law Firm Cybersecurity & Security Gaps
Who this may affect: Law firms, attorneys, professional service firms, businesses sharing confidential information, and clients concerned about data protection.
A recent insider trading case is raising difficult and important questions about law firm cybersecurity, internal controls, and access management.
Corporate lawyer Nicolo Nourafchan, who worked at Sidley Austin, Latham & Watkins, and Goodwin Procter, allegedly mined internal law firm data for securities information to generate tens of millions of dollars, according to prosecutors.
The alleged scheme reportedly spanned approximately ten years. Prosecutors claim Nourafchan accessed documents tied to deals he was never assigned to, including accessing documents 10 days after termination from one firm, while on leave from another, and on the same day he turned in a firm-issued laptop at another firm.
As Stephen Frank, a former securities fraud prosecutor now with Quinn Emanuel Urquhart & Sullivan, noted when speaking generally about these types of breaches: “You can’t have a completely foolproof system no matter what steps you take.” And when breaches happen, they often lead to “very uncomfortable conversations” with clients.
(This article was originally published in Westlaw Today and again through © 2026 Thomson Reuters/Tax & Accounting. All Rights Reserved.)
For lawyers and professional service providers, this story is about more than one indictment. It underscores a broader reality: data security is not simply an IT issue. It is also a governance issue, a compliance issue, and a client trust issue.
Access controls, employee offboarding procedures, internal permissions, monitoring practices, and cybersecurity safeguards all matter — particularly in professions built around confidential information.
Final Thoughts
Legal, tax, and compliance developments rarely happen in isolation. A reporting deadline change, a court ruling involving innocent spouse relief, evolving digital asset guidance, or a breakdown in law firm cybersecurity can all create ripple effects for businesses, professionals, investors, and individuals trying to stay ahead of risk.
That is why staying informed matters—but so does having practical, experienced guidance to help interpret what these developments actually mean in the real world.
At Kundra & Associates, we work with businesses, professionals, and individuals navigating complex tax compliance, tax controversy, and legal risk matters across jurisdictions and industries. As a business tax attorney firm serving clients from Rockville, Maryland, Washington, DC, and Mumbai, we help clients understand changing regulations, evaluate risk, and make informed decisions in an increasingly global and fast-moving environment.
If a recent legal, tax, or regulatory development raises questions for your business or personal situation, experienced guidance can make all the difference.