IRS Warns Against Six Wall Street Tax Strategies It Calls Potentially Abusive as Year-End Planning Begins

The IRS issued Notice 2026-62 in October 2026, putting high-income investors and their advisors on notice about six tax strategies the agency considers potentially abusive.

The notice targets arrangements that the IRS says are designed primarily to defer or eliminate capital gains taxes without genuine economic substance. Among the strategies flagged are certain exchange-traded fund structures that allow investors to swap appreciated assets without triggering immediate tax liability.

Tax attorneys and financial advisors said the notice is a clear signal that the IRS intends to scrutinize these arrangements more aggressively. Taxpayers who have used the flagged strategies may face audits, penalties, and interest on unpaid taxes.

"This is the IRS drawing a line," said one tax attorney who advises high-net-worth clients. "If you've been using any of these structures, you need to talk to your advisor now, before year-end."

The notice comes as many investors are beginning year-end tax planning. Financial advisors typically recommend reviewing portfolios in the fourth quarter to harvest losses, manage capital gains, and make charitable contributions before December 31.

The IRS said it will continue to monitor the use of the flagged strategies and may issue additional guidance or regulations if the arrangements remain widespread. The agency also encouraged taxpayers to report suspected abusive tax schemes through its whistleblower program.

For most individual investors, the notice has limited direct impact. The strategies targeted are generally used by wealthy individuals and institutional investors with complex portfolios. Standard tax planning tools, including tax-loss harvesting, Roth conversions, and qualified charitable distributions, remain unaffected.