Five New Challenges Tax Filers Face in 2026

Although every tax season comes with a unique set of challenges and opportunities, the lead-up to April 15 has been particularly daunting this year. Recent changes at the federal level have created a confusing, overwhelming landscape for taxpayers. In collaboration with our partners at state agencies, community-based organizations, and the Volunteer Income Tax Assistance (VITA) program, tax experts at Code for America are helping people navigate this new environment. For the seventh year in a row, we’re providing high-quality, trustworthy, accessible resources via our free online tax resource, GetYourRefund. 

In our effort to support taxpayers this year, our team has observed a number of common misunderstandings about the new tax laws.

Here are five major changes to be aware of this tax season: 

“No tax on __________”

The One Big Beautiful Bill Act established several tax changes, including new, temporary tax deductions for U.S. citizens. While on its face, the law seems to ease the tax burden on senior citizens and people earning overtime premiums and tips, there are limits to who actually can benefit. 

Take, for example, the Enhanced Deduction for Seniors, which is also referred to as no tax on Social Security income. Under OBBBA, eligible seniors qualify for a deduction up to $6,000 ($12,000 for a married couple filing jointly). While the measure does indeed reduce the percentage of filers who pay taxes on Social Security income, it does not eliminate taxes on Social Security income altogether.

Similarly, despite rumors of “no tax on overtime,” OBBBA does not eliminate tax on overtime pay altogether. Only the additional premium on the hourly rate—or the “half” for someone who earns time and a half for overtime—is eligible for the deduction, which is capped at $12,500 (or $25,000 for a married couple filing jointly). For those who work a lot of overtime—for example, firefighters, police officers, truckers, and construction workers—this distinction between no tax on overtime and no tax on a portion of your overtime adds up. Beyond leaving clients confused, the change has created an additional burden in tax filing. Because employers aren’t required to provide employees with a standalone total of the overtime premium, taxpayers independently have to calculate this figure using pay stubs and other records. Those who earned more than 1.5 times the hourly rate in overtime, got a raise during the year, or had multiple jobs with overtime face further complexities. Even some IRS staff now must amend their returns due to confusion regarding the overtime provision. What may have been a simple return in previous years is now a new administrative hurdle for people who earn overtime pay.

The same is true of the so-called “no tax on tips” provision. While the W-2 an employer distributes to an employee must reflect the total tips the employee reported, the process is significantly more complicated for self-employed individuals. This is especially important for gig workers, like rideshare drivers and those who deliver food. These workers rely heavily on tip income, and many expected to benefit greatly from OBBBA. For the first five weeks of tax season, however, the exact calculation for the tip deduction for the self-employed was unclear. The IRS updated its guidance on March 2, however self-employed individuals who already filed a return may have inadvertently claimed more than the allowable amount. 

Confusion around Trump Accounts

The 530A account, also known as a Trump Account, is a new type of investment account for U.S. citizens under age 18 that parents can open while filing a tax return. In addition to being eligible for the account, children born between 2025 and 2028 also may qualify for a $1,000 initial deposit from the federal government. 

While this has the potential to help families save for their children’s future, it’s important for parents to have all the details about the accounts upon registration. The Treasury department said it will share more information in the future, but no one has released details about who will provide this information or how they’ll contact parents. As such, it will be challenging for parents to verify the legitimacy of the information—thus leaving the door open to bad actors who impersonate Treasury representatives to solicit sensitive data. Furthermore, while a parent/guardian, adult sibling, or grandparent may open a Trump Account, only the person eligible to claim the child as a dependent may elect to receive the $1,000 deposit. 

In addition to confusion about how to manage Trump Accounts, there’s uncertainty about how to use them once the child turns 18. In most cases, like a traditional Individual Retirement Account (IRA), a withdrawal before age 59 ½ would carry a 10% penalty. Although the federal government has said that early withdrawals used to start a business would not be subject to this penalty, it’s not clear that this actually is an exception. In order to position parents to make informed decisions, Treasury must clarify the benefits and limitations of these accounts.

Reducing the benefits of the Child Tax Credit

In light of Code for America’s work to make the Child Tax Credit more accessible, especially for low-income filers, it’s disheartening to see changes that ultimately mean high income families will receive a higher credit while some low income families may be excluded altogether.

For example, while an upper middle class married couple with children may see their credit go up 10%, a low income single mom’s credit would not increase at all. And if that single mom files with an Individual Taxpayer Identification Number (ITIN)—even if both her children have valid Social Security numbers—she’ll no longer qualify for the Child Tax Credit, losing more than $2,000—critical flexible cash that we know can lift families out of poverty.

Elimination of paper checks 

Although most taxpayers who receive a refund get it electronically via direct deposit, some elect to receive theirs via a paper check. Due to a new executive order mandating the federal government’s transition to fully electronic payments, taxpayers who normally receive their refund as a check in the mail will either need to provide direct deposit information or face additional delays. Not having this option could be incredibly burdensome to certain populations, such as survivors of domestic violence who have experienced financial abuse and unbanked individuals. 

Reduction in IRS staff 

Adding to the challenges of this tax season is OBBBA’s cuts to IRS funding. This reduction in funding—which amounts to nearly 10%—comes in the wake of the federal government laying off a quarter of the agency’s staff. Divisions like Taxpayer Services and the Taxpayer Advocate Service, which directly support taxpayers, each saw a reduction of more than 20%. 

With decreases in both funding and staff, the IRS will have a harder time serving taxpayers and collecting the revenue needed to run the country. We’re already seeing backlogs of client support calls, less training for tax filing experts who serve at VITA sites, and more overall disorganization within the agency. Sadly, according to a recent Government Accountability Office report, we face a future of “severe risks” to IRS operations.

We’re here to help

In the midst of these changes, Code for America remains committed to helping low and moderate income individuals accurately file a tax return. To learn more and find help, visit GetYourRefund.org.