IRS examination Archives | TAX CONTROVERSY 360

Latest tax updates: Section 7508A refund claims, whistleblower award eligibility, and court restrictions on IRS collection

This roundup covers key Internal Revenue Service (IRS) developments from June 23 to July 2, 2026, including a notable executive nomination, new electronic filing procedures for COVID-19 disaster relief refund claims, and three significant court decisions shaping tax controversy.

June 23, 2026: US President Donald Trump nominated Jim Gadwood, a tax controversy partner at Miller & Chevalier, to serve as IRS chief counsel. The agency’s top legal official, the chief counsel is responsible for advising IRS leadership, issuing legal guidance, and overseeing the development of US Department of the Treasury regulations, including implementation of the One Big Beautiful Bill Act. Gadwood has focused his practice on federal tax controversies; transfer pricing; tax accounting; and representing large corporations, partnerships, and high-net-worth individuals before the IRS.

June 26, 2026: The IRS issued PLR 202626001, granting a limited liability company 120 days of § 9100 relief to file a late Form 8832 for electing to be treated as an association taxable as a corporation under the entity classification regulations. The IRS concluded that the taxpayer acted reasonably and in good faith and that granting relief would not prejudice the interests of the government after the taxpayer inadvertently failed to timely file its entity classification election despite intending corporate tax treatment from the desired effective date.

The taxpayer must file Form 8832 within 120 days and file all required federal income tax and information returns, including amended returns, consistent with the requested classification. The IRS emphasized that its ruling does not address the taxpayer’s eligibility to make the election or provide relief from any interest or penalties that may otherwise apply, and, as with all private letter rulings, the decision may not be cited as precedent.

July 2, 2026: The IRS announced an electronic filing option for taxpayers seeking to preserve potential claims for COVID-19 disaster relief refunds pending the government’s appeal in Kwong v. United States. Taxpayers with an IRS online account may electronically submit Form 843 before the July 10, 2026, deadline by identifying the claim as relating to Kwong. The IRS stated that it will process the claims only if the government is ultimately unsuccessful in its appeal. The Kwong decision held that the COVID-19 pandemic automatically postponed certain federal tax deadlines until July 10, 2023, potentially entitling taxpayers to refunds of penalties and interest previously assessed for late filing or payment. The IRS continues to challenge that ruling, but the new filing procedure allows taxpayers to preserve potential refund claims while the appeal remains pending.

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

Recent court developments

June 29, 2026: In White v. Commissioner, T.C. Memo. 2026-56, the US Tax Court held that the IRS abused its discretion by sustaining a proposed levy to collect restitution-based assessments (RBAs) under § 6201(a)(4) because the collection action conflicted with a prior US Department of Justice [...]

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Generic IRS Publication Fails to Satisfy the Advance Notice Requirement for Third Party Contacts

In Baxter v. United States, No. 4:15-cv-04764 (ND Cal. 2016), the Internal Revenue Service (IRS) issued a third-party summons for the petitioner’s 2011 tax year to the California Supreme Court seeking documents relating to payments made to the petitioner for his legal representation of capital defendants. The petitioner brought a timely petition to quash the 2011 third-party summons in federal district court. The court granted the petition to quash the 2011 third-party summons because the IRS failed to provide advance notice to the petitioner pursuant to Internal Revenue Code (IRC) section 7602(c)(1), which requires advance notice by the IRS of third party contacts. Importantly, the court rejected the government’s contention that the advance notice requirement could be satisfied by providing a taxpayer with the generic notice in IRS Publication 1, which states that the IRS will “sometimes talk with other persons if [they] need information that [the taxpayer] have been unable to provide.”

To enforce a summons or dismiss a petition to quash a summons, the government must first establish a prima facie case of good faith by making a showing that: (1) the underlying investigation is for a legitimate purpose, (2) the inquiry requested is relevant to that purpose, (3) the information sought is not already in the government’s possession and (4) the administrative steps required by the IRC has been followed.

The district court found that the government has met its burden as to the first three requirements, but it failed to establish that the administrative steps required by the IRC had been followed. The government admitted that the IRS did not provide advance notice to the petitioner of its intent to make a contact with the California Supreme Court, but instead contended that the IRS satisfied the advance notice requirement in IRC section 7602(c)(1) by transmitting a publication about the audit process generally. In finding this argument unpersuasive, the court reasoned that the implementing regulations (301.7602-2(f)(1)(i)(B)) contemplate notice for each contact either orally or in writing.

Having quashed the summons, the court went one step further (and perhaps beyond its jurisdiction) and ordered that any new summons issued by the IRS to the California Supreme Court seeking information regarding payments made to petitioner “shall direct the California Supreme Court to first deliver the summonsed documents to the Court for an in camera review to determine whether the documents contain any privileged attorney-client communications.”

Practice Note: At the beginning of the IRS examination, the taxpayer or his representative should request that the IRS agent provide in writing the names of each person that the agent intends to contact.