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Dear [First Name],
Welcome to your latest tax and financial update from SK Financial CPA. This month, we're sharing important IRS updates, tax news, and practical tips to help you stay informed and prepared. Plus, we're excited to announce the launch of our new SK Financial CPA website
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Important IRS & Tax Updates for Individuals and Businesses
IRS Audit Alert: Hobby Losses vs. Business Losses
The IRS continues to focus on taxpayers who report repeated losses from activities that appear to be hobbies rather than businesses.
To deduct losses on Schedule C, your activity must be operated with a genuine profit motive and in a businesslike manner.
Best practices include:
- Maintain a separate business bank account.
- Keep accurate books and receipts.
- Create and update a business plan.
- Track the time and effort devoted to the business.
- Maintain records showing efforts to earn a profit.
Business Mileage Rate Increased
The IRS increased the standard business mileage rate to 76¢ per mile for business travel during the second half of 2026.
To maximize your deduction, keep records of:
- Date of travel
- Business purpose
- Destination
- Miles driven
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Affordable Care Act (ACA) Premium Tax Credit Changes
Many taxpayers purchasing health insurance through the ACA Marketplace are paying higher premiums in 2026 because enhanced Premium Tax Credits expired after 2025.
Important reminders:
- Fewer taxpayers qualify for Premium Tax Credits.
- Many taxpayers will receive smaller credits.
- Taxpayers receiving advance Premium Tax Credits must reconcile them on Form 8962.
- Beginning with 2026 tax returns, taxpayers who received excess advance credits may have to repay the full excess amount, depending on the final rules.
IRS Introduces Automatic Penalty Relief 2026
Starting with tax year 2025 (and 2026 quarterly returns), eligible taxpayers may receive automatic relief from certain IRS penaltiesno request is required. Taxpayers with a clean filing and payment history for the previous 3 years may qualify for this new automatic penalty waiver.
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IRS Introduces Automatic Penalty Relief
The IRS plans to implement a new Automatic Exemption From Penalty (AEP) program.
Eligible taxpayers with a good compliance history may automatically receive relief from certain:
- Late filing penalties
- Late payment penalties
- Payroll tax deposit penalties
No separate request may be required for eligible taxpayers.
Long-Term Care Tax Benefits
Long-term care insurance premiums may qualify as deductible medical expenses, subject to IRS rules.
New for 2026:
- Certain employees may withdraw up to $2,600 annually from eligible workplace retirement plans to pay qualified long-term care insurance premiums without the 10% early withdrawal penalty (regular income tax still applies).
Foreign Account Reporting Reminder (FBAR)
U.S. taxpayers with foreign financial accounts whose combined value exceeds $10,000 at any time during the year may be required to file FinCEN Form 114 (FBAR).
Failure to report qualifying accounts can result in substantial penalties.
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IRS Warns About Tax Scams
The IRS continues to warn taxpayers about increasing scams, including:
- Fake IRS phone calls, emails, and text messages
- Government impersonation scams
- Investment and cryptocurrency scams
- Romance scams
- Charity fraud
Never provide personal or financial information without verifying the source.
Gambling Tax Changes
Beginning with 2026 tax returns:
- Only 90% of gambling losses may be deducted by taxpayers who itemize, and only up to the amount of reported gambling winnings.
- The reporting threshold for certain gambling winnings on Form W-2G increases to $2,000 for bingo, keno, and slot machine winnings.
IRS Guidance on Artificial Intelligence
The IRS reminds tax professionals that AI tools can improve efficiency but should never replace professional review.
The IRS recommends:
- Verifying AI-generated information
- Protecting taxpayer data
- Reviewing all citations and calculations
- Maintaining secure data handling procedures
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2026 Standard Deduction Update
The IRS has increased the standard deduction amounts for the 2026 tax year to reflect annual inflation adjustments.
- Married couples filing jointly: $32,200
- Single filers and married individuals filing separately: $16,100
- Heads of household: $24,150
Quarter Estimated Tax Payment 2026
The third-quarter estimated tax payment is due in 15 September 2026 for taxpayers who make quarterly estimated tax payments, including many self-employed individuals, freelancers, independent contractors, and small business owners.
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Tax relief in disaster situations
Stay informed about the latest IRS disaster tax relief provisions and important filing deadline extensions available for eligible taxpayers.
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Tax relief in disaster situations
Stay informed about the latest IRS disaster tax relief provisions and important filing deadline extensions available for eligible taxpayers.
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