Incredibly, the IRS tax filing season opened last Monday (1/26/26). Of course, most taxpayers are still receiving some, or more likely most, of their tax documents. Nevertheless, the e-filing portal at the IRS has officially opened.
For the first time in 7 or 8 years there are some material changes to the tax code that will impact our clients. Here are a few that I think you should be aware of (please read all the way through as the final point is perhaps the most impactful):
Senior Deduction
The messaging surrounding this has been at best, poor. There is no such thing as “no tax on Social Security”. In fact, this Senior Deduction is not in any way connected to a taxpayer’s Social Security at all. Social Security is still taxable in the same way it has been in the past.
What has changed is that qualifying Seniors (65 or over) are entitled to an additional $6k per person ($12k if married filing joint). The only qualification is that the taxpayer’s modified adjusted gross income must be less than $75k (single) or $150k (married filing joint). Even taxpayers not yet receiving Social Security are eligible for this deduction.
Action: None required. If you meet the criteria you will get the deduction.
SALT Deduction
As you may recall, the so-called SALT (state and local taxes) deduction was limited to $10k in 2018. That threshold has now been raised to $40k effective for 2025. This is an itemized deduction so a taxpayer still needs to be able to itemize their deductions for this to apply.
The most material SALT items are state and local taxes paid (typically via withholding or quarterly payments) and real estate taxes. Those are combined and can be deducted as an itemized deduction up to the $40k limit detailed above.
Action: Since 2018 many clients were capped at the previous $10k limit so once we reached that threshold we were unconcerned with excess amounts. Now with the increased limit we will need to know all SALT payments made in a tax year.
No Tax on Overtime/Tips
IRS Guidance on these new deductions has been pretty poor. I don’t expect many of our clients to be eligible for either of these deductions but just in case, here are my thoughts.
Tips are the easier of the two to parse. Basically if a taxpayer meets the eligibility they can take up to $25k tip deduction. This is only for employees in occupations that “customarily and regularly” receive tips (think servers, bartenders, hairdressers, etc). And the tips must be otherwise included in income. There are other limitations that may or may not be applicable.
Overtime rules are a mess. The employee must be “non-exempt” which more or less means they are paid by the hour rather than an exempt employee that is typically paid a fixed salary. As opposed to tips that are often separately stated on W2s no such requirement is in place for overtime received in 2025.
So how will we know if you were paid overtime and potentially eligible for the deduction? We won’t unless you tell us! That’s where the fun starts. If you qualify for this deduction we will have to sift through paystubs and essentially figure out which portion is eligible for the deduction. If this is applicable we will, of course, have to bill for this additional work and the necessary presentation.
Action: If you think you are eligible for either of these deductions you are going to have to proactively let us know. Unfortunately, we just won’t know otherwise. We have included a question on this in our organizer.
IRS Payments/Refunds MUST be Electronic
Executive Order #14247 was issued last spring stating that all payments and refunds must be handled electronically as of 10/1/25. Just this past week the IRS clarified their position and stated that there will be some exceptions but generally they expect taxpayers to adhere to the new policy.
Tax Refunds-Tax refunds are required to be routed to a bank account via electronic deposit. Most clients already do this. If you don’t have a bank account you can request a paper check but that refund will be materially delayed (they advise 8 weeks but I suspect it will be even longer).
Tax Owed/Estimated Payments-If you owe money with the return or are making quarterly payments these must be remitted electronically. They are saying they will continue to accept checks mailed in but only for a limited time (no idea what that means).
Action: We will process refunds and tax balances due electronically through our tax software. For quarterly payments, we recommend using IRS Direct Pay. Those can be set up and paid each quarter or preset to come out on the required future dates. If a taxpayer elects to pay via check we unfortunately can’t assist in resolutions should the IRS dispute the receipt date or amount. Most states have a similar web portal to remit payments.
We look forward to hearing from everyone this year.
