Guard Against Spear Phishing Emails
Published July 17, 2026
As cybercriminals continue to target tax professionals with increasingly sophisticated attacks, the Internal Revenue Service (IRS) and its Security Summit partners are reminding practitioners to remain vigilant against phishing and related cyber threats that can compromise sensitive taxpayer information.
As part of the annual "Protect Your Clients; Protect Yourself" campaign, the IRS highlighted several evolving attack methods, including phishing emails, text message scams ("smishing"), spear phishing, clone phishing, whaling attacks targeting firm leadership, as well as the increasingly common "new client" scam. In the “new client” scam fraudsters pose as prospective clients to trick practitioners into opening malicious links or attachments that install malware or steal credentials.
The IRS encourages tax professionals to carefully review unexpected communications. Because many phishing attacks are highly personalized, it may appear to originate from trusted sources such as colleagues, financial institutions, tax software providers or government agencies. Warning signs include urgent requests to verify information such as passwords, account numbers and email addresses. Another warning sign are requests that come from website domains containing subtle misspellings or variations designed to mimic real communications. Tax professionals should independently verify unusual requests before opening attachments, clicking links or disclosing sensitive information.
To reduce cybersecurity risks, the IRS continues to emphasize its "Security Six" best practices for tax professionals. These foundational safeguards include maintaining updated anti-virus software, deploying properly configured firewalls, implementing multi-factor authentication for all accounts, routinely backing up critical data, encrypting sensitive information and using virtual private networks (VPNs) when accessing systems remotely. Week three of the summer Security Summit campaign will cover requirements related to maintaining a Written Information Security Plan (WISP) designed to protect taxpayer information and respond appropriately to data security incidents.
Identity Protection PINs Help Safeguard Taxpayers
As tax-related identity theft continues to be a significant concern, the Internal Revenue Service (IRS) is encouraging taxpayers to take advantage of the Identity Protection Personal Identification Number (IP PIN) program as an effective safeguard against fraudulent tax return filings.
An IP PIN is a unique six-digit number known only to the taxpayer and the IRS that must be included on federal income tax returns to verify the taxpayer's identity. Once issued, the IP PIN prevents identity thieves from filing a fraudulent tax return that uses the taxpayer's Social Security number or Individual Taxpayer Identification Number (ITIN), even if the taxpayer is not otherwise required to file a return.
The IP PIN program is available at no cost to any individual with a Social Security number or ITIN who can successfully verify their identity with the IRS, including taxpayers residing outside the United States. The fastest method of enrollment is through an IRS Individual Account. Taxpayers who cannot complete the online verification process may be qualified to apply using Form 15227 or may complete their identity verification in person at a Taxpayer Assistance Center.
The IRS also reminds taxpayers that a new IP PIN is generated each year and must be retrieved annually before filing a federal return. The IP PIN must be included on all federal tax returns filed, including any amended returns.
An omitted or incorrect IP PIN may result in the rejection of an electronically filed tax return or possible delays in processing a paper return while the taxpayer's identity is verified. It is important to note that the IRS will never contact taxpayers by phone, email, text message or social media to request an IP PIN.
Conservation Easement Deduction Reduced
In Piton Holdings LLC v. Commissioner, 167 T.C. No. 4 (2026), the United States Tax Court held that a partnership drastically overstated the value of a donated conservation easement. As a result, the Court reduced the partnership's charitable contribution deduction and sustained accuracy-related penalties.
The case involved a partnership that claimed a noncash charitable contribution valued at over $42 million for the donation of a conservation easement during the 2018 tax year. The Court reduced the claimed charitable contribution deduction to $800,000, with the land valued at $1.44 million prior to the conservation easement.
In reaching its decision, the Court rejected the taxpayer’s “owner-operator” valuation of the underlying property, finding that the methodology was inappropriate for vacant land with no history of income production. Instead, the Court relied on a comparable sales analysis, supplemented by evidence of contemporaneous partnership interest sales, to determine the property's fair market value before and after the easement donation.
The Court also resolved several procedural issues arising under the Bipartisan Budget Act's centralized partnership audit regime. Among other holdings, it determined that ownership interests in the partnership were governed by the operative membership purchase agreements at the time of the contribution instead of later-executed agreements that purported to backdate the admission of members.
The Court sustained the 40% gross valuation misstatement penalty under IRC Sec. 6662(h), because the claimed easement value exceeded 200% of the Court's determined value. The Court held that the partnership could not claim a reasonable cause defense because Sec. 6664(c)(3) precludes that defense for “gross” valuation misstatements attributable to charitable contribution property. In addition, the Court further rejected the partnership's constitutional challenge, holding that the assessment of the accuracy-related penalty under the BBA partnership audit procedures did not violate the Seventh Amendment right to a jury trial.
Applicable Federal Rate of 5.2% for August: Rev. Rul. 2026-13; 2026-32 IRB 1 (15 July 2026)
The IRS has announced the Applicable Federal Rate (AFR) for August of 2026. The AFR under Sec. 7520 for the month of August is 5.2%. The rates for July of 5.2% or June of 5.0% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2026, pooled income funds in existence less than three tax years must use a 4.0% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”
