What’s Changing in Tax Enforcement—and Why it Matters to You

Tax rules don’t usually change with a bang. They shift quietly—through court decisions, agency notices, and enforcement priorities that only make headlines later, when problems arise.

The updates below may look technical at first glance, but each one touches a real pressure point for taxpayers: retirement money, charitable giving, IRS collections, employer pay practices, scams, and information reporting. Together, they offer a clearer picture of where scrutiny is increasing—and where small missteps can quickly become expensive.

Here’s what’s worth paying attention to now.

IRS Updates Safe Harbor Rollover Explanations for Retirement Plans

The IRS has issued Notice 2026-13, providing updated safe harbor explanations for retirement plan administrators when communicating rollover options for Roth and non-Roth distributions. These explanations satisfy the disclosure requirements under IRC § 402(f).

Why this matters: For plan sponsors and administrators, using one of these safe harbor explanations helps reduce compliance risk by ensuring participants receive legally sufficient information. For participants—especially those nearing retirement—clear explanations are critical to avoiding unintended tax consequences when rolling over retirement assets.

Tax Court Upholds Noncash Charitable Contribution—With Adjustments

In Barney v. Commissioner (T.C. Memo. 2025-133, Dec. 30, 2025), the Tax Court ruled in favor of a taxpayer who transferred five for-profit education S corporations to a nonprofit organization, the Center for Excellence in Higher Education (CEHE). The court determined the transaction constituted a bargain sale, adjusting the fair market value (FMV) of the transferred entities and the consideration received. While the FMV was found to be $300 million, the consideration received was $267 million.

The IRS argued the taxpayer retained dominion and control and failed to meet substantiation requirements under Treas. Reg. § 1.170A-13(c)(3)(ii). The court disagreed, finding the taxpayer’s intent to transition the institutions to nonprofit status credible, and concluding that post-transfer involvement alone did not establish continued ownership.

Why this matters: This decision reinforces that noncash charitable contributions—particularly complex, high-value transactions—remain viable, but only when carefully structured and well-documented. Substantiation, valuation, and intent remain central to surviving IRS scrutiny.

When Silence Costs You: IRS Collections and Missed Opportunities

In T.C. Memo. 2025-117, the Tax Court allowed the IRS to move forward with a levy after the taxpayer failed to meaningfully participate in the Collection Due Process (CDP) hearing. The taxpayer also did not provide the financial information required to support a proposed collection alternative.

Why this matters: Many taxpayers assume that simply requesting a hearing is enough to slow or stop IRS collection activity. It isn’t. CDP rights are procedural safeguards—but they only work if you actively engage. When taxpayers miss deadlines, skip hearings, or fail to submit financial documentation, the IRS is often free to proceed with levies, even where more manageable options (such as installment agreements or offers in compromise) might otherwise have been available.

Department of Labor Recovers $259 Million in Back Wages

The Department of Labor recovered over $259 million in back wages for nearly 177,000 employees in fiscal year 2025—the largest recovery since 2019. The highest recoveries occurred in health care ($53M), construction ($43M), and food services ($42M).

The DOL continues to expand use of the Payroll Audit Independent Determination (PAID) Program, which allows employers to self-audit and voluntarily report potential violations under the Fair Labor Standards Act (FLSA) or Family and Medical Leave Act (FMLA).

Why this matters: Wage-and-hour enforcement remains aggressive. Employers who proactively identify and correct issues may reduce penalties and exposure—but ignoring compliance risks can quickly become costly.

IRS Tax Tip 2026-02: Filing Season Scam Warnings

The IRS continues to warn taxpayers about increasingly sophisticated scams during filing season, including:

• Social media scams: Misleading tax advice circulating online, including influencers encouraging taxpayers to lie on tax forms or claiming the IRS is hiding secret credits. These posts often direct taxpayers to scammers posing as “helpers.”

• Phishing and smishing: Emails or text messages impersonating the IRS or tax professionals and demanding payment or personal information. Clicking links or attachments can expose taxpayers to malware or data theft.

• Protection for seniors: Individuals over age 65 or nearing retirement are frequently targeted for personal or financial information. In some cases, scammers pressure seniors to withdraw funds from retirement accounts, triggering unexpected tax consequences.

• Protections for businesses and tax professionals: Tax professionals are legally required to maintain a Written Information Security Plan and use multi-factor authentication. Businesses are also urged to remain vigilant against cyberattacks aimed at payroll and financial data.

• Identity Protection PIN: An IP PIN is a six-digit number that prevents someone else from filing a tax return using a taxpayer’s Social Security number or Individual Taxpayer Identification Number. Anyone with an SSN or ITIN—including individuals living abroad—can obtain an IP PIN.

Why this matters: Scam-related filings can lead to audits, penalties, delayed refunds, or prolonged identity theft issues. Preventive steps—particularly IP PIN enrollment and strong data security practices—can significantly reduce exposure.

IRS Filing Season Changes for 2026

Key updates include:

• Phase-out of paper refund checks, with increased emphasis on direct deposit

• P.L. 119-21, requiring both spouses filing jointly to have valid SSNs or ITINs by the return due date to claim certain dependent credits

• Introduction of so-called “Trump Accounts,” a pilot retirement savings program for children under 18 with a valid SSN, including a $1,000 contribution for qualifying children born between January 1, 2025, and December 31, 2028

• Form 1099-K reporting, with payment card companies reporting any amount, and third-party platforms reporting payments over $20,000 and 200 transactions

• Continued requirement to address digital asset activity on Form 1040

Administrative Law Update: Life After Chevron

Although Loper Bright Enterprises v. Raimondo overturned the long-standing Chevron deference framework, courts have not abandoned agency oversight altogether. Deference now requires clear statutory authorization, but administrative actions remain subject to review under the Administrative Procedure Act’s arbitrary and capricious standard.

Why this matters: While regulatory challenges may increase, agencies like the IRS retain significant enforcement authority. Taxpayers should not assume diminished compliance obligations based solely on Chevron’s demise.

A Final Thought

Across these developments, one theme is consistent: documentation, engagement, and proactive compliance matter more than ever. Whether dealing with retirement distributions, charitable contributions, IRS collections, wage-and-hour rules, or evolving filing requirements, early guidance and strategic planning can significantly affect outcomes.

At Kundra & Associates, we work with individuals and businesses across the United States and internationally, from our offices in Maryland and Washington, D.C. We regularly advise clients on complex tax, compliance, and enforcement matters—often before issues escalate into audits, penalties, or litigation. If any of these updates raise questions about your own situation, or signal risk you would rather address sooner than later, we welcome the opportunity to discuss next steps.