California restaurant sales-tax audits can create substantial exposure when a restaurant does not maintain detailed records. A recent California Office of Tax Appeals opinion, MPAAKINC, dba Anandabhavan Biryamhut, 2026-OTA-369, illustrates several recurring audit risks for restaurants: unreported taxable sales, the California 80-80 rule, sales of cold food, and the consequences of incomplete books and records.

OTA’s July 2026 business tax opinion list identifies MPAAKINC as a nonprecedential decision involving unreported taxable sales, the restaurant 80-80 rule, sales of cold food, Revenue and Taxation Code section 6359, Regulation 1603, and the submission of hallucinated or fictitious citations.

For restaurant owners, operators, bookkeepers, and investors, the larger issue is straightforward: once records are incomplete, CDTFA may reconstruct taxable sales using indirect methods. That can leave the taxpayer defending against an assessment built from bank records, federal gross receipts, markups, observation tests, point-of-sale summaries, or other available data rather than the taxpayer’s own reliable books.

California taxpayers often assume that if they overpaid tax, the state should refund the money. In practice, refund disputes frequently turn on procedure, not the merits. A taxpayer may have a legitimate overpayment, but if the claim is filed late or the taxpayer cannot prove timely filing, the California Franchise Tax Board may deny the refund without reaching the substantive tax issue.

A recent California Office of Tax Appeals opinion, R. Ardire, 2026-OTA-366, illustrates the risk. The case involved an amended California return that FTB treated as filed after the refund-claim deadline. The taxpayer produced an envelope bearing a private postage-meter date, but OTA concluded that the taxpayer had not carried the burden of proving timely filing.

The decision is nonprecedential, but it is still a useful warning. OTA’s July 2026 opinion cycle included many refund statute-of-limitations decisions under Revenue and Taxation Code section 19306. The pattern is clear: California refund deadlines are strict, and taxpayers should not assume that FTB or OTA will overlook timing defects because the refund appears substantively justified.

The IRS has announced a significant change to federal penalty relief. On July 8, 2026, the IRS introduced a new Automatic Exemption from Penalty program, commonly referred to as AEP, that will begin replacing the longstanding First Time Abate process for eligible taxpayers. The IRS states that the new automatic penalty relief process begins in summer 2026 and is intended to reduce the need for taxpayers to affirmatively request administrative penalty relief.

For individuals, businesses, payroll-tax filers, and tax professionals, this is an important procedural change. Under the prior First Time Abate framework, many taxpayers qualified for relief but did not receive it because they did not know to ask, could not reach the IRS, or did not understand the available administrative relief procedures. The National Taxpayer Advocate described the new automatic process as a taxpayer-rights improvement because eligible taxpayers will no longer need to contact the IRS to request first-time penalty relief.

The new program may help many taxpayers. But it does not eliminate the need to review IRS notices carefully. AEP has eligibility rules, covered penalties, excluded returns, and transition-period issues. Taxpayers should not assume that every IRS penalty will be removed automatically.

The IRS has announced a significant change to federal penalty relief. On July 8, 2026, the IRS introduced a new Automatic Exemption from Penalty program, commonly referred to as AEP, that will begin replacing the longstanding First Time Abate process for eligible taxpayers. The IRS states that the new automatic penalty relief process begins in summer 2026 and is intended to reduce the need for taxpayers to affirmatively request administrative penalty relief.

For individuals, businesses, payroll-tax filers, and tax professionals, this is an important procedural change. Under the prior First Time Abate framework, many taxpayers qualified for relief but did not receive it because they did not know to ask, could not reach the IRS, or did not understand the available administrative relief procedures. The National Taxpayer Advocate described the new automatic process as a taxpayer-rights improvement because eligible taxpayers will no longer need to contact the IRS to request first-time penalty relief.

The new program may help many taxpayers. But it does not eliminate the need to review IRS notices carefully. AEP has eligibility rules, covered penalties, excluded returns, and transition-period issues. Taxpayers should not assume that every IRS penalty will be removed automatically.

New York sales tax compliance remains a significant issue for multistate sellers, online retailers, marketplace participants, service providers, contractors, restaurants, and businesses with customers in New York. A recent New York Department of Taxation and Finance update to its sales tax guidance is a useful reminder that taxability in New York is category-specific and documentation-dependent.

The Department’s Quick Reference Guide for Taxable and Exempt Property and Services explains that sales of tangible personal property are generally subject to New York sales tax unless specifically exempt, while sales of services are generally exempt unless specifically taxable. That distinction sounds simple, but it can become complicated quickly when a business sells mixed products, software, subscriptions, digital services, repairs, maintenance, installation, food, rentals, admissions, hotel occupancy, or other taxable and exempt items.

For businesses selling into New York, the risk is not limited to whether tax was collected. The business must also be able to prove why tax was not collected when a sale was treated as exempt.

Illinois sales tax compliance continues to become more complex for remote sellers, marketplace facilitators, and multistate businesses. The Illinois Department of Revenue has posted its Sales Tax Rate Change Summary effective July 1, 2026, and the Department specifically reminds businesses to adjust cash registers and computer systems to collect the correct tax.

For businesses that sell into Illinois, this is not merely an accounting update. Local sales tax rate changes, destination-based sourcing, marketplace rules, and remote-seller thresholds can create audit exposure, customer issues, amended return problems, and penalty risk if systems are not updated correctly.

Businesses selling into Texas should review their sales tax systems before the July 1, 2026 local rate changes take effect. The Texas Comptroller has posted local sales and use tax updates effective July 1, 2026, including city-level changes for Weston and Taft, new special purpose district taxes, combined area changes, and city annexation and disannexation updates.

For multistate sellers, online retailers, restaurants, contractors, wholesalers, software providers, marketplace sellers, and businesses with Texas customers, even small local rate changes can create compliance problems if tax systems are not updated on time.

Business owners, officers, managers, investors, and financial personnel often assume that a corporation or limited liability company protects them from business tax debts. In many situations, limited liability is an important protection. But California sales and use tax is different.

The California Office of Tax Appeals’ June 2026 business tax opinions include V. Moody, 2026-OTA-300, a nonprecedential opinion involving responsible person liability under Revenue and Taxation Code section 6829. OTA’s listing identifies the issue as “Responsible person liability (R&TC 6829).”

For anyone connected to a business with unpaid California sales tax, the issue is serious. CDTFA may attempt to collect the entity’s unpaid sales and use tax from an individual if the statutory requirements are met.

Treasury and the IRS have issued proposed regulations that would make it easier for digital asset brokers to provide Form 1099-DA statements electronically. The proposal is another step in the government’s broader effort to bring cryptocurrency and other digital asset transactions into the information-reporting system.

For digital asset brokers, exchanges, platforms, payment processors, and investors, the message is clear: digital asset tax reporting is moving from a largely self-reported environment toward a more formal third-party reporting regime.

The IRS has partially acquiesced in the Tax Court’s decision in Abdo v. Commissioner, but only in a narrow way. In an Action on Decision published in Internal Revenue Bulletin 2026-23, the IRS agreed only with the Tax Court’s limited holding that the COVID-19 federal disaster declarations created a mandatory 60-day postponement period from January 20, 2020, to March 20, 2020.

The IRS did not agree with the Tax Court’s broader reasoning. It also did not agree with the court’s invalidation of portions of the Treasury regulations or with any interpretation that would extend the COVID-19 postponement period beyond that 60-day window.

For taxpayers, this is more than a technical procedural development. The issue affects Tax Court filing deadlines, refund claims, penalty abatement requests, interest disputes, disaster postponement rules, and the IRS’s approach to taxpayer arguments based on Internal Revenue Code section 7508A.

Out-of-state businesses selling into California often assume that limited in-state activity will not expose them to California income or franchise tax. A recent California Office of Tax Appeals matter shows why that assumption can be risky.

The California Office of Tax Appeals lists Ken’s Foods, Inc., 2026-OTA-249P, as a June 2026 pending precedential opinion. The issue is whether the taxpayer’s California activities exceeded the protection of Public Law 86-272.

For businesses that sell tangible personal property into California, this is an important development. Public Law 86-272 can provide a narrow federal protection against state net income taxes when a company’s in-state activities are limited to protected solicitation. But the protection is not unlimited, and California tax authorities have continued to examine whether a company’s actual in-state activities go beyond solicitation.

A recent federal district court decision is a useful reminder that the IRS’s levy power is broad, but not unlimited. In Neuberger, Quinn, Gielen, Rubin & Gibber, P.A. v. United States, the U.S. District Court for the District of Maryland held that the IRS wrongfully levied a law firm’s operating account under an alter-ego theory to collect the tax liabilities of a separate corporate taxpayer.

The case is important for law firms, fiduciaries, professional service firms, family offices, and other advisors who form entities, serve as officers or directors, maintain client ledgers, or hold client funds in trust. The IRS may scrutinize these arrangements when it cannot collect from the taxpayer directly. But the government still must prove a legally sufficient connection between the taxpayer and the property levied.

The court found that the IRS failed to do so.

The Treasury Department and IRS have announced that they intend to issue proposed regulations addressing the excise tax on excess compensation and excess parachute payments paid by applicable tax-exempt organizations. The announcement, issued in Notice 2026-36, follows statutory changes that expanded the reach of Internal Revenue Code section 4960.

This is an important development for nonprofits, hospitals, universities, private foundations, tax-exempt affiliates, supporting organizations, and related entities that pay significant compensation to executives, physicians, investment professionals, athletic personnel, administrators, or other highly compensated employees.

The issue is no longer limited only to the five highest-compensated employees of a tax-exempt organization. Under the expanded rules, the tax may apply more broadly to any employee with compensation exceeding $1 million in a tax year or to an employee who receives an excess parachute payment.

That change can create new tax exposure, governance concerns, reporting obligations, and compensation-planning issues for organizations that may not have previously viewed themselves as subject to IRC section 4960 risk.

The IRS has updated its guidance on tax changes under the One, Big, Beautiful Bill Act, including two areas that are likely to generate taxpayer confusion and controversy: limitations on Employee Retention Credit refund claims and changes affecting gig economy workers and Form 1099-K reporting.

For many taxpayers, these updates are not simply technical. They affect whether a business can still receive an ERC refund, how a taxpayer should respond to an IRS disallowance letter, and whether income received through payment apps or online platforms must be reported even when no information return is issued.

The Tax Court’s recent decision in Paschall v. Commissioner, T.C. Memo. 2026-46, is an important development for taxpayers who receive cryptocurrency staking rewards. The case addressed a question that has been heavily debated in the digital-asset tax community: are staking rewards taxable when received, or only later when the taxpayer sells or exchanges the tokens?

The IRS and its Security Summit partners have announced a new framework designed to better protect taxpayers and federal tax revenue from identity theft and refund fraud. The announcement is not just a cybersecurity update. It reflects a broader shift in how tax fraud is occurring and how the IRS, states, tax software companies, payroll providers, and tax professionals are trying to respond.

For taxpayers, businesses, and professional advisors, the practical message is direct: tax identity theft is no longer limited to obviously fake returns or crude phishing emails. Fraudsters increasingly seek real taxpayer, payroll, wage, withholding, and financial data so they can file returns that look legitimate enough to bypass ordinary filters.

That makes prevention, documentation, and rapid response more important than ever.

Lawsuit settlements often end with a signed agreement, a release, and a payment. For tax purposes, however, the matter may not be over when the settlement funds are disbursed. Months later, the plaintiff, counsel, or both may receive one or more IRS Forms 1099 reporting some or all of the settlement proceeds. That reporting can be confusing, and in some cases it can create a mismatch between how the parties viewed the settlement and how the payment is later reported to the IRS.