The Slow Down, Double-Check Edition

It’s 2026. Do you know where your refund is?

The latest IRS tax stats (through February 20, 2026) show the number of taxpayers who have filed so far this season is slightly behind last year, even as refunds are a bit higher. The IRS has received 41.9 million individual returns, down 1.9% from the same point in 2025, and has processed 2.4% fewer returns.

But those refund checks? Those are definitely up. The average refund is $3,804—an increase of 10.2% from last year. Much of the boost is tied to changes under the One Big Beautiful Bill Act (OBBBA), which increased the standard deduction, raised the state and local tax (SALT) deduction cap, and added some new, temporary deductions. Despite those changes, the IRS didn’t update the withholding tables in 2025, so many taxpayers overpaid. The result? A bigger refund than normal. That’s good news for taxpayers who have received those checks–so far, fewer refunds have been issued.

One of the new deductions that’s getting a lot of attention is President Trump’s so-called “No Tax on Social Security.” Under OBBBA, beginning in 2025, seniors age 65 and older can claim a new temporary $6,000 deduction. The deduction—available whether you itemize or take the standard deduction—is per qualifying taxpayer, not per return, which means that a married couple over 65 could claim up to $12,000.

That’s the easy part. What isn’t so easy are the details. It’s important to note that this is not an exclusion of Social Security benefits from tax—it’s simply an additional deduction that reduces taxable income. That means the deduction lowers the amount of income subject to tax, which can reduce—or in some cases eliminate—your tax bill.

However, it does not change the formula that determines whether your Social Security benefits are taxable in the first place. If your benefits weren’t taxable before, they still aren’t. And if they were partially taxable, they still may be. That nuance could be frustrating and confusing for taxpayers who thought that the new law eliminated all taxes on Social Security.

Another sticking point? The deduction is age-based, not benefits-based. That means that if you get Social Security and you’re under 65, you don’t qualify for the deduction. But if you’re over 65 and you haven’t yet gotten Social Security, you do qualify. That’s why the nickname is a bit maddening—the deduction really has nothing to do with benefits.

When it comes to deferring Social Security, it used to be that seniors were encouraged to wait until age 70 to lock in more benefits. That still generally pays, but not by as much as it once did. With higher interest rates, future dollars are worth less in today’s terms, which shrinks the financial advantage of waiting. For a typical couple at 67, the expected gain from delaying may fall in the low single digits—often in the 1% to 5% range—rather than the bigger boosts it appeared to offer when rates were near zero. The better strategy for many couples is to delay the higher earner’s benefit while allowing the lower earner to claim earlier. For single retirees in good health, delaying can still make sense as a form of longevity insurance—but it’s no longer the automatic slam dunk it was.

But back to filing your 2025 tax return. All of these changes are confusing enough. But the current tax season also bumps up the reality of a skinnier IRS. Budget cuts and staffing reductions have left the agency with significant backlogs—some practitioners report issues from 2023 only now being resolved—while data matching and technology make it easier than ever for the IRS to spot discrepancies on returns. That means mistakes are more likely to trigger notices, and resolving those notices could take far longer than in the past. With processing delays, amended return backlogs, and reduced taxpayer service staffing, tax pros are urging taxpayers to double-check their filings and get it right the first time.

At the same time, the IRS is working to eliminate paper processing, expand e-filing, and lean more heavily on automation and AI—all while replacing infrastructure that in some cases dates back decades. In theory, modernization could improve efficiency, compliance, and taxpayer service (fingers crossed). But in practice, staff reductions and funding cuts may slow that progress, particularly if the employees needed to build and maintain new systems are among those leaving.

Assuming that the IRS keeps tiptoeing towards modernization, a major focus will be on bringing taxpayer data together in one place and using AI to analyze it—particularly in audits. Instead of pulling information from multiple legacy systems to piece together a taxpayer’s profile, agents could have a single overview. In theory, that could allow the IRS to identify questionable activity more quickly—and just as importantly, avoid audits where the full data picture shows there’s nothing there.

If it feels like tax pros are a bit mixed on the season, you’re not wrong. While there are some upsides (bigger refunds!), there are some real concerns—like slowdowns and staffing cuts at the IRS. I’ve been saying for a bit that this isn’t the year to rush into filing or be sloppy. And while we’ve still got loads of time in the tax filing season, here’s my cautionary tale.

Last year, just before Tax Day, my mom took a bad fall, landing her in the hospital. And in the midst of all that, I did what I usually do (file an extension) but I forgot the part that matters just as much, which was sending a payment. Of course, by the time I was able to take a breath, I had forgotten all about it—until it was time to file my return a few months later. I was surprised to see a balance pop up with penalty and interest. The experience reinforced something I tell readers every year: Start early, get organized, and don’t wait until the last minute to think about your return.

So take it from me: If you need more time, take it. An extension is automatic if you follow the rules, and it’s far better to file a complete, accurate return when you’re ready, than a rushed one. Just remember that an extension gives you more time to file, not more time to pay. The key is building in enough cushion so that when life happens—and it will—you’re not scrambling. Trust me.

And if you need a little help with filing your return, we’ve got you covered. You can click over to our free Forbes Tax Guide. We’re updating it regularly.

Be sure to give yourself a little grace this time of year, and enjoy your weekend,

Kelly Phillips Erb (Senior Writer, Tax)

This is a published version of the Tax Breaks newsletter, you can sign-up to get Tax Breaks in your inbox here.

Questions

This week, a reader asks:

I know that it’s supposed to be a good idea to put money in my IRA, but how does it help me this year?

This is a good question, and one that depends on a couple of moving parts.

If you contribute to a traditional IRA, you may be able to deduct that contribution on your federal income tax return. A deductible contribution reduces your taxable income for the year. So if you contribute $6,500 and are eligible for a full deduction, your income is reduced by $6,500. The money then grows tax-deferred, and you’ll pay ordinary income tax when you take distributions in retirement. A win-win.

The IRA contribution limit for the 2025 tax year is $7,000 ($8,000 if you’re age 50 or older), and it’s $7,500 for 2026 ($8,600 if you’re age 50 or older). Those limits apply to all your IRA accounts, including your traditional and Roth IRAs. You can make contributions for the tax year up until the filing deadline, which means you can make 2025 contributions until April 15, 2026.

Whether your contribution is fully deductible depends on your income and whether you or your spouse is covered by a retirement plan at work. If neither of you is covered by a workplace plan, the deduction is generally allowed in full regardless of your income. If you are covered by a plan, the deduction phases out depending on your income. For 2025, those limits start at $79,000 for single taxpayers and heads of household. If you’re married filing jointly and covered, the deduction begins to phase out at $126,000. If you’re not covered but your spouse is, the phase-out begins at $236,000. And for taxpayers who are married filing separately, the phase-out starts at just $10,000.

Once you’re phased out, you can still make a contribution, but it’s not deductible. In that case, you track your after-tax basis on Form 8606 so you’re not taxed again later.

Contributions to a Roth IRA are different. You won’t qualify for a current tax deduction, but qualified withdrawals are tax-free.

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Statistics, Charts, and Graphs

Property taxes are back in the spotlight after New York City Mayor Zohran Mamdani floated a roughly 9.5% increase as part of the city’s budget. The reaction was predictably negative.

Property taxes are among the largest and most visible taxes households pay. In fiscal year 2022, they accounted for more than a quarter of total state and local tax collections and more than 70% of local tax revenue. For many communities, they’re the main source of funding for services like schools, public safety, and sanitation.

How much you pay depends on two things: what your property is worth and the tax rate applied to it. Assessors determine value—usually based on comparable sales for homes—and then apply the rate. If you don’t agree with the numbers, you can typically request a reassessment, although the government may do it for you on a periodic basis. Some states reassess annually, others every few years, and some—like California under Proposition 13—primarily at sale, with caps on annual increases in between. In a rising market, those differences can create wide gaps in tax bills, even between similar homes.

Property taxes also impact federal law, thanks to the SALT deduction. While taxpayers who itemize can deduct certain state and local taxes, including real estate taxes, the deduction is capped—currently higher on a temporary basis but scheduled to fall back unless Congress acts. Once you hit the cap, additional property taxes aren’t deductible.

Under OBBBA, the cap is temporarily raised to $40,000 for most filers in 2025 (half that for married filing separately), with inflation adjustments through 2029. The cap will drop back to $10,000 in 2030 unless Congress acts. The expanded cap also phases out at higher income levels. Once your modified adjusted gross income exceeds certain thresholds, the benefit begins to shrink (but it won’t fall below the original $10,000 cap).

The idea that property tax rates could increase–just as the federal government is limiting deductibility–may be one reason debates like New York City’s resonate with taxpayers in other places. Property taxes remain one of the most stable revenue sources for local governments. Cutting them is politically appealing, while raising them is politically difficult. Figuring out how to balance those things? That’s the trickiest part of all.

Taxes From A To Z: H is For Holding Period

A holding period is the length of time a taxpayer owns property. It’s most commonly used to determine whether a gain or loss is short-term or long-term.

For capital assets, property held for more than one year produces a long-term capital gain (which usually translates into lower capital gains rates) or loss. Property held for one year or less is treated as short-term, which is taxed at ordinary income rates.

The details are super important. The holding period typically begins on the day after acquisition and includes the disposition date, which is why a purchase on January 1, 2025, must be sold on January 2, 2026 (not January 1) or later, to qualify as long-term.

Things get more interesting with tacking and other adjustments. In some transactions, like 1031 like-kind exchanges, the person who receives the property will tack on the transferor’s holding period—this is sometimes referred to as a carryover basis. The same concept applies to gifts since the recipient generally keeps the donor’s holding period for gain purposes.

Holding periods can impact a range of other tax transactions like qualified small business stock eligibility under section 1202 and wash sales. As a result, what can appear to be a simple timing rule often has significant consequences.

A Deeper Dive

When IRS Criminal Investigation (CI) talks about its most effective tool, it’s not undercover agents or surprise raids. It’s data—specifically, data collected under the Bank Secrecy Act (BSA). Enacted in 1970 to combat hidden financial activity, the BSA requires banks and certain businesses to report large cash transactions and suspicious activity. Over time, the BSA evolved into a nationwide reporting system administered by FinCEN. Today, Suspicious Activity Reports (SARs), Currency Transaction Reports (CTRs), and Forms 8300 are part of a database that makes financial activity traceable in ways that weren’t possible decades ago.

For CI, that database is often the starting point. In fiscal year 2025, 94% of CI cases were searched against BSA data. SARs alone number in the millions each year, while CTRs—filed for cash transactions exceeding $10,000 in a single business day—total in the tens of millions. These filings help investigators identify patterns, such as rapid fund transfers, funnel accounts, structured deposits, and other red flags. Rather than dramatic revelations, modern financial crime cases are often built by connecting those data points over time.

The $10,000 reporting threshold has been debated, particularly given inflation, which would make the equivalent figure much higher today. But law enforcement maintains that the current threshold remains useful, especially for identifying structuring—when transactions are intentionally broken into smaller amounts to avoid reporting requirements.

In recent years, CI cases involving BSA filings have resulted in high conviction rates, substantial prison sentences, and significant asset forfeitures and restitution. According to CI, the paper trail for crimes is now digital—and it’s often what makes complex financial cases prosecutable.

Tax Trivia

The first Social Security payout was a lump-sum benefit paid to Ernest Ackerman. How long did Ackerman continue to work before he received a check?

(A) One day

(B) One month

(C) One year

(D) Five years

Find the answer at the bottom of this newsletter.

Positions And Guidance

The IRS issued FAQs regarding general refundability and recognizing Indian tribal governments for special-needs determinations for the adoption tax credit.

The American Institute of CPAs (AICPA) sent a letter to the Department of Education acknowledging efforts to clarify the definition of “professional” in a Notice of Proposed Rulemaking (NPRM) on student loans. The AICPA is concerned that the proposed definition of “professional degree” might exclude accounting programs, potentially subjecting accounting students to lower federal loan caps and other consequences.

Noteworthy

The IRS announced the launch of a new web page that allows taxpayers to confidentially report suspected tax fraud, scams, evasion, or other tax-related illegal activities.

Deloitte is consolidating its operations in the Europe, Middle East, and Africa (EMEA) region into a single, unified regional firm called Deloitte EMEA, effective 1 June 2026. This new structure brings together 16 existing member firms across the region into a single coordinated unit. These 16 firms span more than 80 countries, with about 6,000 partners and 132,000 professionals.

Cherry Bekaert announced a strategic alliance with Enkrypt AI, an artificial intelligence (AI) security and compliance platform. Enkrypt AI also provides automated support for emerging AI compliance standards, including ISO 42001.

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Worth A Second Look

The links, clips, and tax takes readers loved (and a few you may have missed):

You can find the entire newsletter here.

Tax Filings And Deadlines

📅 March 16, 2026. Deadline for partnership and S corporation returns to be filed with the IRS (or to request an extension).

📅 April 15, 2026. Deadline for individual tax returns to be filed with the IRS (or to request an extension).

Tax Conferences And Events

📅 May 7-9, 2026. American Bar Association Section of Taxation May Tax Meeting. Marriott Marquis, Washington, DC. Registration required.

📅 June 3-6, 2026. Tax Retreat—The Anticonference. San Antonio, Texas. Registration required.

📅 June 8-11, 2026. AICPA Engage. ARIA Resort & Casino, Las Vegas & live online. Registration required.

Do you have a tax conference or event that you think our readers would be interested in? Let me know.

Trivia Answer

The answer is (A) one day.

From 1937 to 1940, Social Security paid benefits as a single lump-sum payment. The purpose was to provide some funds for those who contributed to the program but would not participate long enough to be vested for monthly benefits.

In 1937, a Cleveland man named Ernest Ackerman retired one day after the Social Security program began. During his one day of participation in the program, a nickel was withheld from his pay for Social Security, and, upon retiring, he received a lump-sum payment of 17 cents.

Feedback

We’ve made a few changes to the newsletter for 2026 and would love your thoughts. What’s helpful? What’s confusing? What tax topics do you want more of? Email me directly—I read every message.