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1st May 2026
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THE HOT STORY

Court ruling could unlock Covid-era tax refunds for millions of Americans

A recent federal court decision has opened the door for tens of millions of U.S. taxpayers to potentially reclaim penalties, interest payments and other charges imposed during the Covid-19 pandemic, after ruling that many IRS filing deadlines were effectively suspended. The judgment found that a 2019 law granting automatic deadline extensions for disaster victims, combined with the nationwide emergency declared in January 2020, meant that tax deadlines should have been paused until July 10th 2023. This contradicts the IRS’s earlier interpretation, under which deadlines remained in force, leading to widespread penalties for late filings and payments. The scope of the issue is significant, affecting individuals, small businesses and large corporations alike, with more than 28m penalties issued in fiscal 2022 alone, totalling over $12bn. Some companies, including large corporates, have already begun pursuing claims based on the ruling. The IRS’s national taxpayer advocate has urged taxpayers to review their eligibility and submit claims, typically via Form 843, before the key deadline of July 10th 2026, which reflects the standard three-year window for refund claims. However, the process may prove complex and slow, as claims must currently be filed on paper and could overwhelm IRS systems.

FILEFORMS - KWONG v U.S.

The IRS May Owe Your Clients Refunds — Meet PenaltyBack by TaxNow

A landmark federal court ruling, Kwong v. United States, established that the IRS failed to properly suspend tax payment and filing deadlines during the COVID-19 disaster period (January 20, 2020 to July 10, 2023). As a result, failure-to-file and failure-to-pay penalties, along with underpayment interest assessed during that window, may have been improperly charged.

The IRS has already refunded $1.2 billion through limited programs, yet most eligible taxpayers have not filed claims. The deadline to file is July 10, 2026.

Don’t let clients ask, “Why didn’t my advisor tell me about this?”—especially when it also represents a meaningful revenue opportunity for your firm.

PenaltyBack by TaxNow enables bulk eligibility scans or a white-labeled, self-service tool, identifying qualifying taxpayers, calculating refunds, and supporting Form 843 preparation and submission.  

Let’s see who qualifies

 

TAX

House passes bill to provide tax relief for sexual assault survivors

Rep. Lloyd Smucker (R-PA) has seen his "Survivor Justice Tax Prevention Act" successfully pass the U.S. House. The bill aims to provide financial relief to sexual assault survivors by eliminating taxes on settlement funds. Smucker emphasized the need for “dignity” and “clarity” for survivors, saying: “As you can imagine, sexual violence doesn't always leave visible scars.” The bill, co-sponsored by Democrat Gwen Moore, seeks to remove the current requirement for proof of “visible harm” to qualify for tax exemptions. The Joint Committee on Taxation estimates the bill could decrease federal revenue by $89m from 2026 to 2036. The proposal now awaits approval from the U.S. Senate before heading to the White House for President Donald Trump's signature.

IRS boosts tax breaks for expats

In a recent ruling, Notice 2026-25, the IRS has enhanced tax breaks for U.S. citizens working abroad. The maximum foreign earned income exclusion for 2026 is now $132,900, an increase from $130,000 in 2025. To qualify, taxpayers must meet specific criteria, including having a tax home in a foreign country and being a bona fide resident or present for at least 330 days in a 12-month period. The IRS states: "You pass the bona fide resident test if you reside in that country for an uninterrupted period that includes an entire tax year." Additionally, expats may qualify for a deduction for foreign housing costs, with a base amount of $21,264 for 2026. Taxpayers must complete Form 2555 to claim the foreign income tax exclusion.

INDUSTRY

How top accounting firms measure success beyond revenue

Top-performing accounting firms utilize five key operational benchmarks to measure success: profitability, time, cash flow, data, and technology. Gabriela Cubeiro emphasizes that while revenue growth is crucial, it does not provide a complete picture of a firm's health. "Chances are your firm already has data on these operational benchmarks," she notes, highlighting the importance of consistent evaluation. Firms should monitor net profit margins, utilization rates, days sales outstanding (DSO), real-time visibility, and technology integration to enhance performance. By focusing on these areas, firms can improve cash flow, reduce delays in collections, and ensure technology supports daily operations effectively.

FIRMS

EY US partners with Rillet to deliver AI-driven finance transformation

EY US has formed an alliance with artificial intelligence (AI)-native ERP provider Rillet to help companies modernize their finance functions by embedding automation, accounting logic, and risk controls directly into core financial processes. The partnership combines EY’s expertise in finance transformation, consulting, and risk management with Rillet’s general-ledger-focused platform, aiming to support organizations transitioning from legacy or mid-market systems by improving speed, scalability, and resilience, while integrating controls into workflows such as reconciliations, reporting, and financial close processes.

ECONOMY

U.S. economy grew 2% through Q1 2026

The U.S. economy expanded at a 2% annualized rate in the first quarter, according to the Commerce Department, up from 0.5% in the prior quarter, reflecting solid momentum heading into the early stages of the Iran war, though slightly below economists’ expectations of around 2.3%. Growth was supported by resilient consumer spending, a sharp increase in business investment, particularly in AI-related equipment and software, along with higher exports and a rebound in government spending following the previous quarter’s shutdown. Business investment surged 10.4%, marking its strongest growth since mid-2023 and highlighting the continued importance of artificial intelligence-driven capital expenditure, while a key measure of underlying demand (core GDP) also strengthened to 2.5%. Consumer spending rose 1.6%, driven by services, although inflation-adjusted spending declined as rising prices, particularly from higher energy costs, eroded purchasing power.

New jobless claims drop to lowest in over 50 years

The Labor Department reported on Thursday that new jobless claims in the seven days to April 25th fell 26,000 from the week prior to a seasonally-adjusted 189,000, well below the 212,000 expected among economists polled by the Wall Street Journal. The four-week moving average of new filings fell 3,500 to 207,500, while the total number of claims for unemployment benefits, reported with a one-week lag, declined 23,000 to 1.79m. According to High Frequency Economics, this week’s number for new jobless aid applications was the fewest since September of 1969. “There is nothing to worry about in this report. YET!,” wrote Carl Weinberg, the group's chief economist, commented. “At some point, elevated energy costs and prices for materials will cause firms to lay off marginal workers to protect profit margins.”

Inflation rises to 3.5% as energy prices surge amid Iran war

The Federal Reserve’s preferred inflation gauge rose sharply to 3.5% annually in March, the highest level in nearly three years, as a surge in energy prices driven by the ongoing Iran conflict pushed monthly inflation up 0.7%, above expectations. The Commerce Department said that core inflation, which excludes food and energy, increased 0.3% on the month and reached 3.2% annually, indicating persistent underlying price pressures even beyond volatile fuel costs. The spike in gasoline and other energy expenses accounted for a significant share of overall consumer spending growth, with nominal spending rising 0.9% in March but only 0.2% after adjusting for inflation, highlighting how rising prices are eroding purchasing power. At the same time, real disposable income fell 0.1% for the second consecutive month, and the personal saving rate dropped to 3.6%, its lowest level in four years, signaling growing financial strain on households.

REGULATORY

Senate bans own members from using prediction markets

The Senate has unanimously approved a bipartisan resolution to prohibit its members from participating in prediction markets. The decision follows concerns about senators using sensitive information for personal gain. Senator Bernie Moreno, who sponsored the resolution, said: “United States senators have no business engaging in speculative activities like prediction markets while collecting a taxpayer-funded paycheck, period.” The resolution also extends to staff members. Additionally, Senators Todd Young and Elissa Slotkin have proposed a bill to ban all federally elected officials from using insider information for betting.

PERSONAL FINANCE

Emergency savings show gaps by gender and age, AICPA finds

Most Americans have some level of emergency savings, but the size and distribution of those reserves vary widely, with 78% reporting at least some savings, while 22% have none, according to a new AICPA survey. The data highlights disparities across demographics, with women and mid-career adults particularly vulnerable - 25% of women and 30% of those aged 45–54 report no savings - while only 10% of adults aged 18–54 have a year or more of expenses set aside, compared with higher levels among older groups. Rising living costs are also impacting financial decisions, with many Americans delaying major purchases due to affordability concerns and lack of savings, underscoring ongoing financial strain despite efforts to build emergency funds.

HEALTHCARE

Cigna to exit ACA market as rising costs drive insurer pullback

Cigna has announced it will withdraw from the Affordable Care Act (ACA) marketplace next year, becoming the second major insurer to exit after Aetna, amid declining enrollment and rising premiums following the rollback of federal subsidies. The ACA market has seen membership fall as higher monthly costs push consumers - particularly younger, healthier individuals - out of coverage, creating a riskier and more expensive pool of remaining policyholders. This dynamic has led insurers to raise premiums further, fueling a cycle of declining participation and pricing uncertainty. Cigna, which covers around 369,000 ACA members across 11 states, said the segment has been consistently unprofitable and too small to materially impact its overall business, prompting a strategic shift toward more sustainable areas.

TECHNOLOGY

Tax pros face IRS data bottleneck

Access to timely IRS data is crucial for tax professionals, yet the Centralized Authorization File (CAF) is facing significant delays. The IRS's service standard for processing authorizations has shifted from five days to an average of 10 business days, with some cases taking over 26 days. In 2025, nearly 7m authorizations were filed, leading to over 972,000 staff hours spent on processing. The IRS's introduction of Business CAF aims to streamline this process, but issues such as access barriers and lack of transcript availability hinder its effectiveness.

INTERNATIONAL

U.S. identifies Vietnam as a top concern ​on intellectual property rights

The U.S. Trade Representative's office has said Vietnam is a top concern or "Priority Foreign Country" ​on intellectual property rights. The identification is reserved by statute for countries with "the most egregious IP-related acts, policies, ​and practices with the greatest adverse impact on relevant ​U.S. products," and means ⁠that the listed country had not been entering into "good faith ​negotiations or making significant progress in negotiations" to provide adequate and effective ​IP rights protection, the USTR office explained.

AND FINALLY...

President Trump drops Scotch whisky tariffs ‘in honor’ of King Charles

The U.S. has announced it will remove tariffs on Scotch whisky imports from the U.K., reversing a policy that had imposed a 10% duty and was set to rise to 25% in June. President Donald Trump said the decision had been made "in honor" of King Charles III following their recent meeting. The move restores preferential market access for a key U.K. export category worth approximately £1bn annually and comes after the Scotch whisky industry experienced a 15% decline in U.S. exports earlier this year due to trade barriers. Industry bodies and government officials on both sides of the Atlantic have welcomed the decision, highlighting its importance for producers, distributors and hospitality businesses. Under the revised arrangement, tariff relief applies specifically to whisky, while related goods such as barrels remain subject to existing duties. 
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