The 2026 filing season is shaping up to be one of the most challenging yet potentially rewarding in recent memory. Treasury officials are predicting record refunds due to the One Big Beautiful Bill Act provisions and unchanged withholding tables, but practitioners face significant headwinds from IRS workforce reductions and compressed preparation timelines.
Treasury Secretary Scott Bessent forecasts that many households could see $1,000 to $2,000 more in refunds because workers didn't adjust their withholding after the July passage of OBBBA. The Tax Foundation estimates average refunds will increase between $300 to $1,000 compared to typical years. While this news will delight clients, it creates unique challenges for practitioners navigating new provisions without adequate IRS guidance or fully updated software.
The IRS lost between 17% and 25% of staff in key areas, including submission processing and accounts management. The agency's adjustments inventory could reach 6 million cases in fiscal 2026, nearly double the 3 million case backlog from 2025. IT staff reductions of 25% threaten timely system updates for inflation adjustments and OBBBA changes. These capacity constraints mean high-quality, well-documented filings will move through the system more smoothly while complex or incomplete submissions face longer processing times.
OBBBA introduces several provisions that will generate client questions and require careful documentation. The qualified tips deduction caps at $25,000 annually and phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers). The overtime deduction allows up to $12,500 ($25,000 for joint filers) with similar phase-outs. Because employers aren't required to report tips and overtime separately from wages for 2025, practitioners will need various documentation sources to substantiate these deductions, though the IRS has indicated transition relief may reduce scrutiny this first year.
The senior deduction of $6,000 ($12,000 for qualifying married couples) requires age verification and MAGI calculations to determine phase-outs. The car loan interest deduction allows up to $10,000 annually for qualifying vehicles that underwent final assembly in the United States, with specific gross vehicle weight rating and purchase requirements.
On the business side, 100% bonus depreciation returned for qualifying property placed in service after January 19, 2025. Domestic research and experimental expenditures paid or incurred in tax years beginning after December 31, 2024, are now eligible for immediate expensing. The Section 179 deduction limit increased to $2.5 million with a $4 million phase-out threshold.
State conformity and decoupling decisions add another layer of complexity. When states selectively conform to or diverge from federal provisions, it creates challenges in areas such as business deductions, depreciation, and addbacks that particularly impact clients operating in multiple states.
To manage this compressed season successfully, update client intake questionnaires to capture expanded data points for new credits and deductions. Communicate early with clients about documentation requirements, particularly for tips and overtime since these won't appear separately on W-2s for 2025. Set realistic expectations about potential IRS processing delays for complex returns. Prioritize e-filing and direct deposit whenever possible for faster acknowledgment and more predictable processing. Build workflow time for late-season regulatory and software updates, and verify original returns have fully processed before filing amendments.
This challenging season also highlights the value of collaboration between practitioners, software providers, and government agencies in helping clients navigate unprecedented change.
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
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