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OTA’s July 2026 business tax opinion list identifies MPAAKINC as a nonprecedential decision involving unreported taxable sales, the restaurant 80-80 rule, sales of cold food, Revenue and Taxation Code section 6359, Regulation 1603, and the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The decision is nonprecedential, but it is still a useful warning.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.

California taxpayers often focus on whether they overpaid tax. That is understandable, but in a refund dispute, being right on the numbers is not always enough. If the refund claim is filed too late, the California Franchise Tax Board may deny the claim without ever reaching the merits.

Recent California Office of Tax Appeals opinions reinforce that point. OTA’s June 2026 franchise and income tax opinions include J. Lord and D. Lord, 2026-OTA-304, a nonprecedential decision involving the statute of limitations on a claim for refund under Revenue and Taxation Code section 19306. OTA’s June 2026 list also includes many other refund statute cases, showing that missed refund deadlines remain a recurring problem in California tax controversy.

The National Taxpayer Advocate’s Fiscal Year 2027 Objectives Report to Congress offers a mixed picture of the 2026 filing season. For many taxpayers, the IRS filing season worked as intended. Returns were processed, refunds were issued, and electronic systems handled a large volume of filings.

But the report also highlights a serious problem for taxpayers whose cases do not move smoothly through automated processing. When a return is suspended, a refund is delayed, identity theft is suspected, a notice is unclear, or a taxpayer needs human assistance, the experience can become frustrating, slow, and financially disruptive.

The California Office of Tax Appeals has posted its current opinion-cycle notice, reminding taxpayers and practitioners that comments on whether opinions posted on June 1 should or should not be designated as precedential are due by June 29. OTA also states that new opinions will be posted on July 6.

For many taxpayers, this may sound like a narrow administrative update. It is not. OTA opinions can shape how California tax disputes are decided, especially when an opinion becomes precedential. Businesses, individuals, tax professionals, and taxpayers with pending California appeals should understand why these opinion cycles matter.

The IRS’s 2025 Data Book shows a tax agency under pressure. The IRS still processed hundreds of millions of returns and collected trillions of dollars, but audit closures and recommended additional tax declined from the prior year. At the same time, staffing reductions and operational strain may affect how quickly the IRS handles audits, notices, refunds, identity-theft cases, correspondence, and appeals.

For taxpayers, the practical lesson is not that IRS enforcement has disappeared. It has not. The lesson is more nuanced: IRS enforcement may become less predictable, more automated in some areas, more selective in others, and slower when human review is required.

That combination can be difficult for taxpayers. A lower audit rate does not necessarily mean a lower risk of IRS contact. It may mean fewer traditional audits, more document-matching notices, longer response times, delayed resolutions, and greater importance placed on records, transcripts, and procedural deadlines.

The IRS has announced a new time-limited settlement opportunity for eligible partnerships involved in syndicated conservation easement and historic preservation easement disputes. For investors still involved in these cases, the offer deserves careful review.

Artificial intelligence is no longer a distant technology issue for lawyers, accountants, and tax professionals. It is already being used to summarize documents, draft correspondence, organize facts, analyze regulations, and speed up research. Used carefully, AI can help professionals work more efficiently. Used carelessly, it can create serious risks: inaccurate advice, fabricated citations, disclosure of confidential information, improper billing, and professional discipline.

California’s Franchise Tax Board recently highlighted an important conformity update for tax-exempt organizations. In its June 2026 Tax News, FTB explained that Senate Bill 711 updated California’s conformity to Internal Revenue Code section 512 as of January 1, 2025, subject to California-specific modifications.

For California nonprofits and other exempt organizations, this matters because California is now aligning more closely with the federal rules requiring separate reporting of unrelated business taxable income, commonly referred to as UBTI, for each unrelated trade or business under IRC section 512(a)(6).

This is not merely a form change. It may require exempt organizations to revisit how they identify unrelated business activities, track revenue and expenses, allocate shared costs, preserve net operating loss information, and prepare for future California reporting requirements.

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.

Form 843, Claim for Refund and Request for Abatement, is one of the principal tools taxpayers use to request a refund or abatement of certain penalties, additions to tax, interest, fees, or other amounts. But Form 843 is not just a form. The form itself is only the cover page. The substance of the request is usually the narrative: the factual chronology, legal basis, supporting documents, and explanation of why the IRS should remove or refund the amount at issue.

From a tax perspective, options are not simple. The tax result can turn on the type of option, the exercise price, the fair market value of the stock, the timing of exercise, the holding period, the employee’s alternative minimum tax exposure, and whether the company complied with technical plan and valuation rules.