TAX CONTROVERSY 360
TAX CONTROVERSY 360
McDermott Will & Schulte’s real-time tax disputes insights
TAX CONTROVERSY 360
McDermott Will & Schulte’s real-time tax disputes insights

Refund claims gain national attention: COVID-19 disaster period may eliminate underpayment interest and penalties

by and | Feb 25, 2026 | ,

Taxpayers that paid underpayment interest or failure-to-file or failure-to-pay penalties between January 20, 2020, and July 10, 2023, may have viable refund claims. In some cases, the potential recoveries are substantial, but refund statutes of limitation are running and may expire on a rolling basis. National attention has accelerated around this issue, including a recent Wall Street Journal article quoting McDermott Will & Schulte Tax Controversy Partner Shawn O’Brien. O’Brien observed that “[t]here’s potentially a sizable number” of taxpayers who still have opportunities available in seeking refunds and amending tax returns to get money back. However, he also noted, “[e]very day that goes by, it would be a missed opportunity.”

In our prior coverage, we discussed the US Court of Federal Claims’ decision in Kwong v. United States, in which it held that the 2019 version of Internal Revenue Code § 7508A applied to the COVID-19 federally declared disaster, resulting in a mandatory postponement period until the end of that disaster (plus 60 days). Under Kwong, federal income, estate, gift, employment, and excise tax payment deadlines falling within the disaster period were effectively extended to July 10, 2023. Because underpayment interest and certain penalties run from the payment due date, a postponement would negate the accrual of interest and penalties during the disaster period.

Taxpayers potentially eligible for refunds include those that:

  • Paid underpayment interest that accrued between January 2020 and July 2023 (the disaster period)
  • Entered installment agreements during the disaster period and paid interest that accrued on those installment payments
  • Incurred failure-to-file or failure-to-pay penalties that accrued during the disaster period
  • Made estimated tax adjustments resulting in interest assessments
  • Are currently under Internal Revenue Service examination where interest computations are at issue.

Given the amounts publicly reported in pending cases, even a partial reduction of assessed interest may result in meaningful recoveries.



IRS roundup: February 9 – February 17, 2026

by , and | Feb 24, 2026 | , , ,

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for February 9, 2026 – February 17, 2026.

IRS guidance

February 9, 2026: The IRS issued Revenue Procedure 2026-13, providing discount factors for insurance companies to compute Section 846 discounted unpaid losses and recoverable Section 832 discounted estimated salvage for the 2025 accident year. This revenue procedure also provides discount factors to be used in tax years beginning in 2025 for losses incurred in the 2024 accident year and earlier accident years. Discount factors for tax years prior to 2025 were previously provided in Revenue Procedure 2025-15 and Revenue Procedure 2023-10.

February 12, 2026: The IRS issued Notice 2026-15, describing interim guidance on restrictions for certain energy credits related to the status of, and sourcing from, a prohibited foreign entity (PFE). These restrictions were enacted by Public Law 119- 21, 139 Stat. 72 (July 4, 2025) and provide:

  • Descriptions of rules the US Department of the Treasury (Treasury) and the IRS intend to provide in proposed regulations regarding material assistance from a PFE.
  • Descriptions of the Sections 45X, 45Y, and 48E interim safe harbor guidance for determining a qualified facility’s, energy storage technology’s, or eligible component’s material assistance cost ratio related to determining whether there was material assistance from a PFE.
  • PFE restrictions that the Treasury and the IRS will include in forthcoming proposed regulations.
  • A glossary of defined terms, a request for comments, and guidance on substantiation and taxpayer ability to rely on guidance provided in Sections 3 – 5 of the notice.

February 17, 2026: The IRS released Internal Revenue Bulletin No. 2026-8, which includes Revenue Ruling 2026-5. This revenue ruling provides Section 6621 interest rates for underpayments and overpayments for Q2 2026, as described below:

  • 6% for overpayments generally
  • 5% for overpayments in the case of a corporation, which drops to 3.5% for the portion of a corporate overpayment exceeding $10,000
  • 6% for underpayments generally
  • 8% for large corporate underpayments 

The IRS also released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums, and Chief Counsel Advice).

Penalty disclosure guidance

February 9, 2026: The IRS released Internal Revenue Bulletin No. 2026-7, which includes Revenue Procedure 2026-12. This revenue procedure specifies when information shown on a return is considered an adequate disclosure for purposes of reducing an understatement of income tax under Section 6662(d) and avoiding a Section 6694(a)’s preparer penalty.

Under Revenue Procedure 2026-12, taxpayers generally “must furnish all required information in accordance with the applicable forms and instructions, and the money amounts entered on these forms must be verifiable.” An amount is verifiable where, “on audit, the taxpayer can prove the origin of the amount (even if that number is not ultimately accepted by the Service) and the taxpayer can show good faith in entering that number on the appli­cable form.” And where an item is being reported does not [...]

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New USPS postmark rules may impact tax filings

by , and | Feb 13, 2026 | ,

Effective December 24, 2025, the United States Postal Service (USPS) adopted final rules that revise how postmarks are defined and treated. These changes have important implications for taxpayers who plan to mail their tax returns and rely on postmarks to establish timely filing.

Under the new framework, the USPS has clarified and, in some cases, narrowed what qualifies as an official postmark, where and when postmarks may be applied, how postmark dates correspond to the USPS’s acceptance of a mailpiece, and which mailing methods provide valid evidence of mailing dates. Taxpayers who do not adhere to the updated requirements may face an increased risk that their returns will be treated as late‑filed.

The USPS finalized the newly added Section 608.11, “Postmarks and Postal Possession” (the Final Rule), as part of the Domestic Mail Manual. On August 12, 2025, the USPS published the proposed rule, 90 F.R. 38716, and invited public comment. The USPS noted that this process was not a traditional rulemaking process because the Final Rule does not make any changes to USPS procedures for applying postmarks to mail and instead provides key definitions. The Final Rule’s purpose is to document existing practices and provide clearer guidance on how postmarks work and how they may differ from a mailpiece’s actual date of mailing.

What is the Final Rule?

Under the Final Rule, a “postmark” is defined as a marking applied by the USPS to confirm its acceptance of custody of a mailpiece. The postmark displays the location of the processing facility or retail unit that applied it, which may not be the location where the USPS first obtained possession of the mailpiece. As a result, the postmark date is not necessarily the date the USPS first obtained possession of the mailpiece. The postmark date generally reflects either the date of the first automated processing operation that is performed on the mailpiece or the date that the mailpiece was first accepted at a retail counter. Because most postmarks are applied at processing facilities, the postmark date and location often differ from the date and place of initial acceptance of the mailpiece

On January 2, 2026, the USPS issued a public statement titled Postmarking Myths and Facts, reiterating that it has not changed its postmarking practices. However, the USPS explained that recent adjustments to its transportation network mean some mail may not reach the processing facility on the same day it is collected or dropped off. Consequently, the postmark date applied at a processing center may differ from the actual date the customer mailed the item.

The Final Rule aims to equip customers with enough information to adjust their mailing practices (e.g., by mailing earlier, requesting a manual postmark at a retail location, or purchasing a Certificate of Mailing).

Importance for tax filings

Internal Revenue Code Section 7502(a) provides that the postmark date is treated as the date a tax return or payment is delivered to the Internal Revenue Service (IRS), sometimes known as the [...]

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IRS roundup: January 21 – February 9, 2026

by , and | Feb 11, 2026 | , , ,

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for January 21, 2026 – February 9, 2026.

January 26, 2026: The IRS released Notice 2026-9, which provides a one-year extension to make certain amendments to individual retirement arrangements (IRAs), simplified employee pension arrangements, and savings incentive match plan for employees IRA plans. The new deadline is December 31, 2027. The extension gives the IRS additional time to issue model language for the various changes resulting from compliance with the SECURE 2.0 Act of 2022 and related legislation.

January 27, 2026: The IRS released Fact Sheet 2026-2, which provides updated questions and answers regarding the implementation of Executive Order 14247, Modernizing Payments To and From America’s Bank Account. The executive order advances the transition to fully electronic federal payments both to and from IRS.

January 29, 2026: The IRS announced that it is accepting applications for the Electronic Tax Administration Advisory Committee (ETAAC) through February 28, 2026. The ETAAC provides an organized public forum for discussing electronic tax administration issues, such as prevention of identity theft and refund fraud.

February 2, 2026: The IRS released Internal Revenue Bulletin No. 2026-6, which includes Announcement 2026-3. The announcement provides a copy of the arrangement entered into by the competent authorities of the United States and Spain regarding the implementation of the arbitration process provided for in paragraphs 5 and 6 of Article 26 of the US-Spain income tax treaty and its protocol.

February 2, 2026: The IRS announced that it would continue operations under the current lapse in appropriations until further notice, using funding from the Inflation Reduction Act of 2022 (IRA).

February 3, 2026: The US Department of the Treasury and the IRS issued proposed regulations regarding the clean fuel production credit enacted by the IRA and amended by the One Big Beautiful Bill Act. The new law made important changes to what is often referred to as the 45Z credit. The proposed regulations would provide rules for determining clean fuel production credits. They also would amend three sets of final regulations: the elective payment election regulations and the credit transfer election regulations (to clarify language relating to ownership of clean fuel production facilities) and the federal excise tax registration regulations (to make them clearer and more consistent with the clean fuel production credit registration requirements in these proposed regulations). The proposed regulations would affect domestic producers of clean transportation fuel, taxpayers that may claim a credit for a related producer’s fuel, and excise tax registrants. Comments must be received by April 6, 2026. There is a public hearing that will be held on May 28, 2026, and requests to speak at the public hearing will be accepted until May 26, 2026.

Recent court decisions

January 28, 2026: The US Tax Court issued its opinion in Aventis Inc. v. Commissioner, rejecting Aventis’s attempt to treat [...]

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