Michael Gray, CPA's Tax and Business Insight
August 4, 2026
© 2026 by Michael C. Gray
ISSN 1539-395X
A monthly report to help you prepare for your financial future, keep more of what you earn by minimizing your taxes, and build an extraordinary business!
Route to _______ _______ _______ _______ _______
(If you find this information valuable, please pass it on to a friend!)
Table of Contents
- School days, school days.
- Family celebrations.
- October 15 will soon be here!
- Third quarter estimated tax payment due September 15, 2026.
- Loads of tax and financial planning ideas and information are included in the 2026 Edition of Employee Stock Options - Executive Tax Planning.
- Loads of tax and financial planning ideas and information are included in the 2025 Edition of How to Use Roth & IRA Accounts to Provide a Secure Retirement.
- IRS issues new standard mileage rates, effective July 1, 2026.
- IRS allows additional time to fix a QTIP election.
- IRS penalty relief simplified.
- Termination of a family trust leaves (adult) children owing gift tax.
- New Treasury regulations make certain Charitable Remainder Trust transactions listed transactions.
- Trump accounts now accepting contributions.
- California's new sales tax on digital transactions will mostly hit businesses.
- California income sourcing rules for nonresident sole proprietors struck down.
- California enacts First EV rebate.
- California conforms to the federal tax treatment of Trump accounts.
- Do you sell products, services or software to CPAs?
- Attention CPAs-would you like help with marketing your services?
- Attention CPAs-do you need support for tax issues?
- Attention Accountants! Speed up processing your business closings!
- Please share your good experiences with Michael Gray, CPA.
- Financial Insider Weekly past episodes.
- Visit our new book review: Antidemocratic
- Follow me on social media!
- Check out my blogs.
- Subscribe/Remove from Michael Gray, CPA's Tax & Business Insight
View at Half Moon Bay July 12, 2026 School days, school days.
It's hard to believe, but summer vacation is almost over and most children will be back in school by the end of August! Please drive carefully with those kamikaze kids out there!
Family celebrations.
Janet and I are celebrating our wedding anniversary this month (55 years)! Our other August family celebrations include my granddaughter, Minerva Siemer's, birthday and Janet's sister, Gail Johnston, is celebrating a birthday. Happy birthdays!
October 15 will soon be here!
The extended due date for 2025 individual income tax returns is October 15, 2026. If you've been putting off getting your tax returns finished, now is the time to get in motion.
Third quarter estimated tax payment due September 15, 2026.
Remember the third quarterly federal estimated tax payment is due September 15, 2026. California doesn't have a third quarter estimated tax payment.
Loads of tax and financial planning ideas and information are included in the 2026 Edition of Employee Stock Options - Executive Tax Planning.
For more information and a 25% discount go to https://www.siliconvalleypublishingcompany.com/products/employee-stock-options-executive-tax-planning-2026-edition. Also available at www.amazon.com.
Loads of tax and financial planning ideas and information are included in the 2025 Edition of How to Use Roth & IRA Accounts to Provide a Secure Retirement.
For more information and a 25% discount go to http://www.rothirainvestingbook.com. Also available at www.amazon.com.
IRS issues new standard mileage rates, effective July 1, 2026.
The IRS has issued new standard mileage rates to include increases in fuel prices. The new rates are effective on or after July 1, 2026. The rate for business use of a vehicle is increased from 72.5¢ per mile to 76¢ per mile. The rate for medical and military-related moving is increased from 20.5¢ per mile to 23.5¢ per mile. The mileage rate for charitable use of a vehicle is fixed by statute at 14¢ per mile.
(Announcement 2026-11.)
IRS allows additional time to fix a QTIP election.
A decedent's will created a marital trust and directed that a Qualified Terminable Interest Property (QTIP) election should be made on the decedent's federal income tax return so the trust would qualify for the federal estate tax marital deduction. The attorney and the accountant who prepared the estate tax return listed the property in the wrong box on Schedule M as "all other property" and not in the QTIP box, which isn't an effective QTIP election.
The executor's representative requested that the IRS grant an extension of time under § 301.9100-1 and § 301.9100-3 of the Procedure and Administration Regulations to correct the error and make an effective QTIP election.
The IRS granted the extension.
Note the extension is not automatic and a fee is required to make it.
Tax return preparers who prepare federal estate tax returns should review their client files to assure they made these elections properly, or consider requesting an extension of time to fix them.
(Private Letter Ruling 202629011, July 17, 2026. (Ruling is only effective for this taxpayer.))
IRS penalty relief simplified.
The IRS has introduced a new Automatic Exemption from Penalty (AEP) process that expected to begin this summer. AEP will provide relief automatically for eligible returns with original due dates on or after January 1, 2027. AEP applies for eligible original returns beginning with tax year 2025 and 2026 quarterly returns and future tax periods. Taxpayer who have a history of timely filing their tax returns and paying any tax due in the three prior years (or 12 consecutive quarters for quarterly returns).
Penalties will not be assessed during processing for:
- Failure to file
- Failure to pay
- Failure to deposit
No taxpayer action is required. The IRS will apply AEP and issue a notice that relief was granted.
AEP is replacing the First Time Abate administrative relief program.
(IR-2026-83, July 8, 2026, https://www.irs.gov/payments/administrative-penalty-relief)
Termination of a family trust leaves (adult) children owing gift tax.
A decedent left the residue of her estate to a trust with income distributable to her surviving husband and remainder to her children. The surviving husband and children terminated the trust and distributed the assets to the husband.
The Tax Court ruled the children made gifts of their remainder interests to their father of more than $35 million each. The Court also said that, since the children's receipt of the distributions to which they would have been titled under the will would have carried with it obligations to reimburse their father for gift taxes, the gifts from the children to the father should be reduced by the children's avoided reimbursement obligation.
Although federal estate and gift taxes only apply to very large estates (for 2026, the federal lifetime estate and gift tax exemption is $15,000,000), this case is a reminder to be careful about terminating trusts. There is a way this trust could have been divided among the father and children to avoid federal gift taxes.
(Lewis v. Commissioner, T.C. Memo. 2026-58, July 20, 2026)
New Treasury regulations make certain Charitable Remainder Trust transactions listed transactions.
On July 8, 2026, the IRS issued final Treasury Regulations naming certain transfers to a Charitable Remainder Trust as listed transactions, requiring special disclosure.
The transfers requiring disclosure involve transferring property with a fair market value in excess of basis (cost for determining gain or loss) to a Charitable Remainder Annuity Trust (CRAT), which then sells the property and uses some or all of the net proceeds to purchase a single premium immediate annuity (SPIA). The taxpayer claims the CRAT annuity is taxable to the recipient only to the extent of the income portion of the SPIA annuity payment.
(IR-2026-82, TD 10051, July 8, 2026)
Trump accounts now accepting contributions.
Individuals who elected to open Trump accounts for children using Form 4547 may now start making contributions. The effective date was July 4, 2026. The IRS has sent activation emails to individuals who applied.
Remember, a child can only have one Trump account that employers and others may contribute to. Employers may contribute up to $2,500 to a Trump account of an employee's child as a tax-exempt employee benefit. The maximum aggregated amount that may be contributed by other persons is $5,000.
(https://home.treasury.gov/news/press-releases/sb0508)
California's new sales tax on digital transactions will mostly hit businesses.
California 2026-2027 budget legislation that will make certain sales of digital products and services subject to California sales and use tax, effective January 1, 2027. The majority of states have already enacted similar legislation.
The tax applies to the sale or licensing of electronic software and software as a service (SaaS), including Canopy, Zoom, QuickBooks online, etc. Paying in advance for software or SaaS during 2026 will avoid the tax for 2027 delivery.
A sale, purchase or use for California sales and use tax purposes includes:
- Any transfer of title or possession, exchange, barter, conditional or otherwise in any manner or by any means, of a digital product transferred on tangible storage media for a consideration, and
- Any permanent or temporary transfer of the right, in any manner or by any means whatsoever, to open, view access, download, copy, update, possess, store, manipulate, or otherwise use a digital product transferred electronically or accessed remotely for a consideration.
(Revenue and Taxation Code §§ 6006(h) and (i), 6009(b), 6010(f) and (g).)
The definition of tangible personal property includes a digital product and any copyright or patent associated with the product. (Revenue and Taxation Code § 6016.)
Sales of custom computer software remain exempt from sales and use taxes. (Revenue and Taxation Code § 6009.5.)
These items are exempt from the definition of digital products subject to tax:
- Digital assets;
- Digital audio works;
- Digital audiovisual work;
- Digital books;
- Digital infrastructure, defined as a cloud-based service provided remotely that allows a user to create, deploy, scale or run the user's own computer software on the service provider's digital platform;
- Digital video game products; and
- Digital visual works.
(Revenue and Taxation Code § 6016.1.)
From studying this list, it appears California is focusing its tax on digital products on business-to-business purchases.
Also exempt are:
- Sales for resale (Revenue and Taxation Code § 6362.4); and
- Sales, storage, use, or other consumption of digital products purchased solely for use outside California or in interstate or foreign commerce. (Revenue and Taxation Code § 6372.)
- Sales where the service primarily involves the application of human effort by the service provider in response to a customer request for service, such as a tax return delivered electronically by a tax return preparer or a will or trust delivered electronically by an attorney. (Revenue and Taxation Code § 6372.1.)
The California Department of Tax and Fee Administration will eventually post more details online, or see your tax advisor.
(SV 122, Chapter 26-23, Spidell's Quarterly Tax Update®, July, 2027, p. 41, "2026-2027 Budget, Digital products subject to sales tax.")
California income sourcing rules for nonresident sole proprietors struck down.
A California Appellate Court has issued a summary judgment rejecting the Franchise Tax Board's position that a nonresident sole proprietor who performed all of his work outside California was conducting a "unitary business" that was subject to California tax on his California-source income based on California's market-based sourcing rules.) The decision is a published, precedential decision. The Franchise Tax Board is appealing the decision to the California Supreme Court (Case No. S297035).
The Court's ruling overturned a previous precedential opinion of the Office of Tax Appeal in Appeal of Bindley, 2019-OTA-179P.
Nonresident sole proprietors who have previously reported California taxable income for work performed exclusively outside California should consider filing protective refund claims.
(Garcia-Rojas v. FTB, California Court of Appeals for the 1st Appeals District, Case No. 172054, May 1, 2026.)
California enacts First EV rebate.
Governor Newsom has approved SB 168 (Chapters 26-81), funding a new $3,500 instant rebate through the MyFirst EV program for California residents who purchase their first electric vehicle through a dealer. The total rebate is $3,500 for new EVs with a MSRP of up to $50,000 and $1,750 for used vehicles sold for up to $25,000. The MSRP limit doesn't apply for Lucid Motors and Rivian, which are headquartered in California. The rebate will be available later this summer.
If the rebates aren't considered a purchase price reduction, they could be taxable income.
(Spidell's California Minute, "California launches new EV program." July 30, 2026.)
California conforms to the federal tax treatment of Trump accounts.
Governor Newsom has approved SB 180, which conforms California tax law to the federal tax treatment of Trump accounts. Earnings in the accounts won't be taxed until distributions are made and certain employer contributions to Trump accounts and qualified contributions from a governmental entity are excluded from taxable income.
(Spidell's Flash E-Mail, "California conforms to Trump Account treatment, provides EV rebates." July 14, 2026.)
Do you sell products, services or software to CPAs?
Maybe I can help with writing promotional material and marketing ideas. Call me, Michael Gray, at 408-918-3161 or email mgray@taxtrimmers.com.
Attention CPAs-would you like help with marketing your services?
Maybe I can help with writing promotional material and marketing ideas, including encouraging referrals from your current clients. Call me, Michael Gray, at 408-918-3161 or email mgray@profitadvisors.com.
Attention CPAs-do you need support for tax issues?
Michael Gray, CPA can help you with research and guidance on complex tax planning and tax return reporting issues. mgray@taxtrimmers.com.
Attention Accountants! Speed up processing your 2019 business closings!
Do you still have 2019 business income tax returns on extension that need to be done? Check out this trial balance software, EZ Trial Balance, that's super-easy to set up and use. There is a desktop version and an online version. The online version includes consolidations and ratio analysis for analytical review. http://www.eztrialbalance.com
Please share your good experiences with Michael Gray, CPA.
As you know, more and more people are going to the internet to find information about service providers. We hope you will share some good words about experiences that you have had with our firm. One of the sites where you can share your experiences is yelp.com.
We use Angie's List to assess whether we're doing a good job keeping valued customers like you happy. Please visit AngiesList.com/Review/4258970 in order to grade our quality of work and customer service.
Financial Insider Weekly past episodes
After eight years of production, I have discontinued producing new interviews for Financial Insider Weekly. Doing the show has been a rewarding experience and I consider back episodes to be my legacy of financial literacy education to our community. Back episodes available at https://www.youtube.com/user/financialinsiderweek.
Michael Gray regrets he can no longer personally answer email questions. He will answer selected questions in this newsletter.
For your questions about dependent exemptions, see IRS Publication 501 at www.irs.gov.
Visit our new article!
Follow me on Social Media!
LinkedIn: If you enjoy LinkedIn, please follow me at www.linkedin.com/in/michaelgraycpa and www.linkedin.com/company/the-marketing-alchemist/
I'm also on Bluesky! You can also follow me on Bluesky at https://bsky.app/profile/michaelgraycpa.bsky.social.
I'm also on Instagram. You can also follow me on Instagram at www.instagram.com/michaelgray690/
Facebook: I've been suspended on Facebook and I'm working on getting my account restored.
Check out my blog.
I have also started a blog at www.michaelgraycpa.com. Check it out!
Home Newsletter Archive Introducing Michael Gray, CPA Articles Tax FAQ Need Help? Other Links
Michael Gray, CPA2482 Wooding Ct.San Jose, CA 95128(408) 918-3162FAX: (408) 938-0610email: mgray@taxtrimmers.comHours: 8am - 5pm PDT Monday - Friday
© 2026
Connect on LinkedIn
Connect on BlueSky
Connect on Instagram
Our Blog
