Tax Brief Issue 1: New Tip Deduction, 1099-S Digital Assets, & 5472 Penalty Relief

This week's IRS updates provide critical insights into new deductions for qualified tips, revised reporting requirements for digital assets on Form 1099-S, and guidance on reasonable cause relief for Form 5472 penalties, crucial for year-end planning and compliance.

01. IRB 2026-18 (Rev. 04-27-2026)

• For taxable years beginning after December 31, 2024, the new Section 224 deduction for qualified tips is limited to $25,000 per tax return, regardless of filing status, and married individuals must file a joint return to claim it.
• A new 1% excise tax under Section 4475 applies to remittance transfers made after December 31, 2025, but only when the sender uses cash, a money order, a cashier's check, or a traveler's check; transfers funded by account withdrawals or U.S.-issued debit/credit cards are exempt.

Source: IRS IRB · 2026-04-27

02. Form 1099-S (Rev. December 2026)

• The revised Form 1099-S (December 2026) now requires reporting of digital asset gross proceeds from real estate transactions in Box 2c, with specific details on the digital assets in Boxes 8a through 8d.
• This Form 1099-S (Rev. December 2026) must be used to report transactions occurring in calendar year 2026, with the first filings to the IRS beginning in January 2027.

Source: IRS forms · 2026-04-28

03. Form 5472 penalty relief: who counts as a 'small corporation' under §6038A

• A small corporation, qualifying for 'liberal' reasonable cause relief from Section 6038A penalties, is defined as one with gross receipts of $20,000,000 or less for the taxable year.
• To receive 'liberal' application of reasonable cause relief, a small corporation must establish lack of knowledge of Section 6038A, limited presence in and contact with the United States, and prompt, full compliance with all IRS requests for Form 5472 and relevant materials, as shown in a written statement under penalties of perjury.

Source: IRS WD · 2026-04-24