Tax practice looks different in early 2026 than it did even two years ago. The legislative landscape has shifted, the IRS is in the midst of a historic modernization effort funded by the Inflation Reduction Act, and the tools available to both practitioners and revenue agents have advanced considerably. For business owners, these changes have practical implications for how they interact with tax advisors, how they approach compliance, and what they should expect from the tax system going forward. This post offers some observations on where tax practice stands today and where it appears to be heading.

The Legislative Dust Has Settled—For Now

After years of uncertainty about the fate of the Tax Cuts and Jobs Act provisions, the passage of the One Big Beautiful Bill Act brought meaningful resolution. The individual rate structure, the Section 199A qualified business income deduction, the doubled child tax credit, and the increased standard deduction are now permanent features of the tax code rather than provisions with a looming expiration date.^[1]

For tax practitioners, this certainty is a genuine improvement. For the past several years, much of tax planning involved modeling multiple scenarios—one assuming TCJA extension, another assuming partial extension, and a third assuming full sunset. That analytical burden has been replaced by the more productive work of optimizing within a known framework. Multi-year tax projections are more reliable, entity selection analysis is more stable, and retirement planning calculations have a firmer foundation.

The estate and gift tax exemption remains at its inflation-adjusted level—significantly higher than the pre-TCJA baseline—which continues to shape estate planning for high-net-worth individuals. The permanence of the higher exemption, however, does not eliminate the need for estate planning. If anything, it redirects the focus toward income tax planning, basis management, and the non-tax objectives that estate plans serve.

IRS Modernization and Enforcement

The IRS's modernization initiative, funded initially by the Inflation Reduction Act and continued through subsequent appropriations, is producing visible changes in the agency's capabilities. The most significant development for business owners is the increased audit capacity. After a decade of declining examination rates, the IRS has hired thousands of new revenue agents and invested in data analytics tools that improve case selection. Audit rates for high-income individuals and large partnerships have already increased and are expected to continue rising.^[2]

The practical implication for business owners is straightforward: the era of declining enforcement is over. Returns that might have gone unexamined five years ago are more likely to draw scrutiny today. This does not mean taxpayers should be more conservative than the law requires—it means they should be more deliberate about documentation, more rigorous about the positions they take, and more thoughtful about maintaining the records that support their return positions. The standard of "would I be comfortable defending this position on audit?" has always been the right question. It simply carries more practical weight when the probability of audit is higher.

The IRS has also improved its taxpayer service functions. Wait times for phone calls have decreased, online account functionality has expanded, and the Direct File program—which allows eligible taxpayers to prepare and file returns directly with the IRS at no cost—has grown beyond its initial pilot. For business owners with employees, the improved IRS service capabilities can reduce the friction associated with payroll tax questions, penalty abatement requests, and installment agreement negotiations.

Technology in Tax Practice

The integration of artificial intelligence and machine learning into tax practice is no longer speculative—it is happening. Tax preparation software increasingly uses AI to identify potential deductions, flag inconsistencies, and suggest planning opportunities. Large accounting firms have deployed AI-powered tools for document review, research, and compliance checking. And the IRS itself is using advanced analytics to identify patterns in return data that suggest non-compliance.^[3]

For business owners, the rise of AI in tax practice has several implications. First, the commoditization of basic compliance work—preparing straightforward returns, computing standard deductions, and filing routine extensions—is accelerating. This is not a bad thing. It means that the value proposition of a tax advisor is shifting even more toward judgment, strategy, and counseling rather than data entry and form preparation.

Second, the improved analytical capabilities mean that tax advisors can process more data and identify planning opportunities that might have been overlooked in a manual review. Entity restructuring analysis, multi-year tax projections, and scenario modeling are all enhanced by tools that can rapidly process large datasets and present the results in actionable form.

Third, business owners should expect their tax advisors to be using these tools. A practitioner who is still manually preparing complex returns without technological assistance is not necessarily providing lower quality work, but is likely providing it at higher cost and with greater risk of human error. The best practitioners combine professional judgment with modern tools—using technology to handle the computational work while applying their expertise to the interpretive and strategic questions that software cannot answer.

The Shift Toward Advisory Services

Tax practice has been evolving from a compliance-centric model to an advisory-centric one for some time, and the trend continues to accelerate. Business owners increasingly expect their tax advisors to be strategic partners who help them make better decisions throughout the year—not just technicians who prepare returns after the year ends.

This shift is driven in part by the complexity of the tax code itself. The interaction between the Section 199A deduction, entity selection, compensation planning, retirement contributions, and state tax obligations creates a multi-variable optimization problem that benefits from proactive, year-round attention. A tax advisor who reviews the situation only at year-end is missing opportunities that require earlier action—estimated tax adjustments, retirement contribution timing, depreciation elections, and income recognition strategies that must be implemented before December 31.

For business owners evaluating their tax advisory relationships, the key question is whether the advisor is providing proactive guidance or merely reactive compliance. The former approach—identifying issues before they become problems, modeling the tax implications of business decisions before they are finalized, and recommending adjustments throughout the year—delivers significantly more value than the latter.

Mississippi-Specific Developments

Mississippi's ongoing income tax phase-out continues to shape the state tax landscape for business owners. The graduated reduction in individual income tax rates—part of the broader national trend of states competing for residents and businesses through tax policy—reduces the state income tax burden but also changes the calculus for entity selection, pass-through entity tax elections, and domicile planning.^[4]

For businesses operating in Mississippi, the interaction between the declining state income tax rate and the federal SALT deduction cap (now permanent) affects the optimal approach to state tax planning. The pass-through entity tax election, which allows qualifying entities to deduct state taxes at the entity level and bypass the individual SALT cap, remains a valuable tool—but its value changes as the underlying state rate decreases.

What Business Owners Should Expect from Their Tax Advisors

In the current environment, business owners should expect several things from their tax advisory relationships. They should expect proactive communication—not just during filing season, but throughout the year as legislative developments, IRS guidance, and business changes affect their tax position. They should expect their advisor to use modern tools and technology to improve accuracy and efficiency. They should expect substantive analysis of planning opportunities, not just compliance with minimum filing requirements. And they should expect honest, direct counsel about the risks and benefits of the positions they take on their returns.^[5]

The state of tax practice in 2026 reflects a profession that is more capable, more data-driven, and more strategically oriented than at any point in recent memory. For business owners who engage with the system thoughtfully—working with qualified advisors, maintaining good records, and making informed decisions—the environment is one of genuine opportunity.