Summary
- Appropriations showdown continues
- IRS issues inflation adjustments
- Remittance excise tax penalty relief
- IRS gets a CEO
Appropriations Showdown
The Federal government shutdown has continued for almost two weeks. It remains unclear how long the shutdown will last. Neither party has shown any sign of backing down.
After using other funding to avoid furloughs for the first week following the shutdown, the IRS has furloughed 35,000 of its 75,000 employees. The IRS walked back a notification to employees that they would receive backpay when the government is reopened, stating that the matter is still to be determined. The IRS also informed employees that the IRS will issue further Reduction in Force (RIF) notices, with affected employees to be given at least 60 days’ notice. According to a government filing last week in a lawsuit brought by the American Federation of Government Employees to block RIFs during the shutdown, 1,446 Treasury employees were sent RIF notices since the shutdown began on October 1.
Notice 2025-55 Relief from Penalty for Failure to Deposit Remittance Excise Tax
On October 7, the IRS issued Notice 2025-55, Relief for Failure to Deposit Remittance Excise Tax, addressing the excise tax under newly created Tax Code Section 4475 on certain remittance transfers enacted in Section 70604 of the OBBBA. Section 4475 imposes a 1 percent excise tax on certain remittance transfers occurring after December 31, 2025.
The tax is paid by the sender, but the remittance transfer provider must collect and remit the remittance transfer tax quarterly. If the remittance transfer tax is not collected at the time of the remittance transfer, the remittance transfer provider must pay the tax.
Remittance transfer taxes are part of Tax Code Chapter 36 excise taxes, which are reported on Form 720, Quarterly Excise Tax Return. Treasury has exercised its authority under Tax Code Section 6302 to require that each person required to file Form 720 must make deposits of each tax for each semi-monthly period in which tax liability is incurred.
Thus, the first deposit of the remittance transfer tax will be due on January 29, 2026, covering the first 15 days of January 2026.
Section 6656 imposes penalties on a person’s failure to make timely deposits as required under Section 6302 and the regulations thereunder. The penalties are relieved if the failure was due to a reasonable cause.
Notice 2025-55 provides relief from the Section 6656 penalty with respect to remittance transfer tax deposits for the first three calendar quarters of 2026 if the following conditions are satisfied: “(i) the remittance transfer provider makes timely deposits of the applicable remittance transfer tax, even if the deposit amounts are computed incorrectly, and (ii) the amount of any underpayment of the applicable remittance transfer tax for each calendar quarter is paid in full by the due date for filing the Form 720 for that quarter.”
Notice 2025-55 also provides that “a remittance transfer provider’s ability to use the deposit safe harbor under § 40.6302(c)-1(b)(2) will not be affected by a failure during the first three calendar quarters of 2026 to make deposits of the remittance transfer tax as required under part 40, provided the remittance transfer provider satisfies the reasonable cause standard for those quarters.”
Inflation Adjustments
On October 9, the IRS issued Revenue Procedure 2025-32 containing inflation adjustments for 2026 tax items, and also for tax items changed by the OBBBA for 2025.
For 2025 tax items modified by the OBBBA, Rev. Proc 2025-32 modifies the prior inflation adjustments for those items set out in Rev. Proc. 2024-40.
For 2026, Rev. Proc. 2025-32 lists inflation adjustments for 63 different items. The list is organized by Tax Code section number and runs from Tax Table Rates, Section 1(j)(2)(A)-(D) to Qualified Small Employer Health Reimbursement Arrangement, Section 9831.
Tax Policy Personnel
Treasury Secretary Bessent announced that Frank Bisignano, the Commissioner of the Social Security Administration, will also serve as the Chief Executive Officer of the IRS, which is a new position. The Trump administration has indicated it still intends to nominate someone to serve as IRS Commissioner, to whom the IRS CEO will report. In the interim, Secretary Bessent is continuing to serve as the acting Commissioner of the IRS.