It is finally here. Tax season 2026.
If you feel like the rules just did a 180, you aren't imagining things. Between the massive "One, Big, Beautiful Bill" (OBBBA) and a major reshuffling at the agency itself, what is going on with the IRS right now is a complete departure from how we’ve filed for the last decade.
Honestly, it's a lot to keep track of.
The doors officially open on January 26, 2026. That is the day the IRS starts clicking "accept" on those 1040s. But before you hit send, there are some massive changes to how you get paid, what you can deduct, and even how the IRS watches your bank account.
The Big Refund Shock: Why You Might Get $1,000 More
Most people are going to see a bigger check this year.
Estimates from groups like the Tax Foundation suggest the average refund could jump by $300 to $1,000. Why? Because the OBBBA cut individual income taxes for 2025 by about $129 billion, but the IRS didn't actually adjust the withholding tables in time. Basically, your boss probably took out too much tax all year, and now you’re getting it back in one lump sum.
It is basically an accidental savings account courtesy of the federal government.
New Deductions That Actually Matter
There are three "headline" breaks that are going to save people a ton of money this year. If you work a service job or a lot of extra hours, listen up.
- No Tax on Tips: You can now deduct up to $25,000 in tip income. This starts phasing out if you make more than $150,000 (or $300,000 for couples), but for most service workers, it’s a game-changer.
- Overtime is (Mostly) Tax-Free: You can deduct up to $12,500 in overtime pay ($25,000 for joint filers). Again, there are income caps, but this is a massive win for hourly workers.
- The Senior Boost: If you are 65 or older, there is a brand-new $6,000 deduction just for you.
Paper Checks are Dead (Seriously)
This is the one that’s going to trip people up.
The IRS is officially phasing out paper refund checks. Following an executive order aimed at "Modernizing Payments," the agency is pushing everyone toward direct deposit. If you don’t have a bank account, you’re going to have to look into prepaid debit cards or "Trump Accounts"—a new type of savings vehicle for children and families introduced under the new law.
If you insist on a paper check, expect a massive headache. The agency is trying to be "digital first," which is a nice way of saying they really don't want to lick any more envelopes.
What Happened to Direct File?
Last year, everyone was talking about the IRS's own free filing software, Direct File. It was supposed to be the "TurboTax killer."
Well, it’s gone.
The program was shut down for the 2026 season. If you liked it, sorry. The current administration and the Department of Government Efficiency (DOGE) decided to pivot back to public-private partnerships. This means you’re back to using IRS Free File (if your income is under $89,000) or paying for software like TaxSlayer or H&R Block.
It is a bit of a bummer for the 300,000 people who used it last year and loved the simplicity.
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The IRS is Getting Smaller—And "Smarter"
The IRS workforce has shrunk by about 26% since the end of 2024.
We went from over 100,000 employees down to around 75,000. You’d think that means fewer audits, right? Wrong. The agency is leaning hard into AI and data matching.
Instead of a human auditor sitting at a desk with a highlighter, they’re using machine learning to flag "mismatches." If your 1099-K from Venmo doesn't match what you reported, a computer is going to catch it instantly.
The New Crypto Form: 1099-DA
If you trade crypto, you’re about to meet Form 1099-DA.
For the first time, brokers and exchanges are required to send this form to both you and the IRS. It tracks your "Digital Asset" proceeds. The IRS is very serious about this. They’ve listed digital asset transactions as one of their top audit triggers for 2026.
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Even if you just used Bitcoin to buy a coffee or sold a tiny bit of ETH, the IRS knows about it now. There’s no more "hiding" in the blockchain.
Real Talk on Audit Risks
Audits are focusing on very specific areas this year. If you fall into these categories, make sure your receipts are in a shoebox (or a digital folder).
- High Earners: If you make over $400,000, you’re on the radar.
- Car Loans: There’s a new $10,000 deduction for interest on American-made cars. The IRS is watching this closely to make sure people aren't claiming it for foreign imports.
- SALT Expansion: The State and Local Tax (SALT) deduction cap jumped from $10,000 to $40,000. This is great for people in high-tax states like New York or California, but it also means more people will be itemizing, which always invites more scrutiny.
How to Handle the 2026 Season
The reality of what is going on with the IRS right now is a mix of "more money in your pocket" and "less human help if you get stuck."
With 25,000 fewer staffers, the phone lines are going to be a nightmare. If you have a complex situation, don’t wait until April 15. The "Where’s My Refund?" tool is still your best friend, and it usually updates within 24 hours of e-filing.
Actionable Steps for Your 2025 Return
- Gather Your New Forms: Look for the 1099-DA (crypto) and the 1098-VLI (vehicle loan interest). You’ll need these to claim the new deductions.
- Verify Your Direct Deposit: Since paper checks are being sunset, double-check your routing number. One typo could send your $1,000 bonus refund into a black hole.
- Track Your Overtime and Tips: Don't just guess. The IRS is using automated tools to verify these deductions against your W-2 data.
- File Early: With the staff shortages, the earlier you get in the queue, the less likely you are to get caught in a processing bottleneck.
The 2026 tax season is going to be a wild ride. It’s a year of transition where the technology is getting better, but the human support is getting thinner. Stay organized, use the new deductions, and for heaven's sake, don't forget to report your crypto.