Talking Taxes With a Tax Professional: What's New in 2026 and How to Navigate Filing Season

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1:00Elizabeth Ayoola:I did not want to face another penalty. I filed my taxes. Did you? Have you?

1:04Sean Pyles:Good work, Elizabeth. Yes, I did. It took me a good two and a half hours, but I'm glad it's behind me.

1:08Elizabeth Ayoola:So you do it yourself then?

1:10Sean Pyles:Yeah, I want the educational experience so we can talk from what we've done in our lives to our listeners. So here we go. You're such a nerd, Sean.

1:16Elizabeth Ayoola:I will give advice based on whatever it is that my tax person does. So there we go. There you go.

1:21Sean Pyles:Well, that's the other side of the journey. Yeah. Well, this episode, we're all about tax season 2026.

1:29Sean Pyles:Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles.

1:36Elizabeth Ayoola:And I'm Elizabeth Ayola. Today, we're going to go deep into tax season 2026, which is for filing your 2025 taxes, by the way. We're going to be talking about what's new, common mistakes that people make when filing, and also how you can keep your finances safe and yourself sane over the next month or so.

1:56Sean Pyles:And in case you've never filed before or have lived in a cave for a few years, your deadline to file and pay your taxes is April 15th. So to help us sort through all of this, we're joined by Tom O'Sebin, Director of Tax Content for the National Association of Tax Professionals. Tom, welcome to Smart Money. It's great to be here. Nice to meet you and Elizabeth. Likewise. So let's start with what's new this year in tax land. And last year, Congress passed and the president signed the One Big Beautiful Bill Act, which extended a number of tax breaks from a 2017 tax law and made some other changes, too.

2:29Sean Pyles:What are some of the major elements that tax filers should be aware of? That's really a good question. And I'm going to start with something that people haven't been talking about because I'm a tax practitioner, along with the tax content job. I've been doing this for 35 years. And one of the things we had was a great expansion in energy credits under the American Rescue Plan under President Biden. Well, the one big beautiful bill, as you just started describing, Sean, actually ends energy credits for most people now in 2025. What we didn't expect, and we didn't see it at the National Association of Tax Professionals either, is that they've actually made it harder for clients to claim an energy credit in 2025.

3:06And so I wanted to give a couple of tidbits for the audience that I've run into meeting with my clients. For example, if you've had a new exterior windows installed or a new exterior doors or a new furnace, they're actually requiring this year what's called a qualified manufacturer ID number, a QMID. I've never seen that before in all of the years we've had energy credits. And then they've gone one step further saying that if you're going to file your return electronically, which I hope everyone who's watching this, including yourselves who have filed, do that electronically and not by paper. we have to actually attach a PDF of the receipt for the purchase of those items.

3:43It seems kind of crazy in one respect when you think about this is the last year for energy credits, and they've made it even harder to go ahead and qualify for those credits. And we love tax credits because they're a dollar for dollar reduction in tax. So if I could, I'd like to give you a couple of sources that I've run across and I'd like to thank social media for helping provide those. and one of them is called quitcarbon.com and the other one is called rebateblue slash QMID. That's like Queen Mary Ida David. Those are a couple of sources where you can put in like the brand name, let's say train, T-R-A-N-E.

4:18It's the first thing that locked up tax returns for me, meeting with clients this year. And I thought that would be something to throw in at the beginning of this podcast. So that's kind of really outside of what we would expect everybody to be concentrating on when you talk about the one big beautiful bill act. And that's the idea of, and let me make sure that we get this clarification when you watch and see what politicians have to say. They talk about, well, that tips are no longer taxable. And that overtime is no longer taxable. And Social Security is no longer taxable. You can't see it, but you can feel the hair on the back of my neck bristling when I hear those statements.

4:50Because what it really is, is the one big, beautiful bill created a tip deduction, an overtime deduction. Social security benefits could still be taxable. What they really did in that respect is that persons who are age 65 or over, they now qualify for what is called a senior deduction. It's$6 ,000 for a person. They don't have to be on social security. They just have to be age 65 by the end of the year. And that's in addition to the regular standard deduction, correct? Sean, that's a great point. That's exactly correct. It is a separate deduction. And all of these deductions, when we talk about them, are what we call below the line.

5:27So they do not impact adjusted gross income. So if you happen to be in the type of business where tips are common, think about restaurants, bars, beauty salons, all of that, then those are typically tipped industries. So I would tell people to, if they're really confused, and a lot of people, by the way, even though I'm coming from a national tax organization, I really believe that a lot of taxpayers should be able to prepare their own return. Not everyone should have to hire a professional, you know, that they made the tax law so complicated that individuals can't do it themselves any longer.

6:01So I'm very much supportive of an educated consumer, you know, being able to do this themselves. So the IRS came out with some guidance this past November, it actually listed over 70 industries that potentially are tipped type workers. And, you know, we think of the obvious ones. So that will be important to do when tips are, for example, disclosed on a W-2.

6:25Sean Pyles:Yeah. One thing I've been wondering about is how many people are actually going to be affected by the no tax on tips over time, because it's a pretty small amount of the overall workforce, correct? I would agree with you. I have seen just a smattering of the tip deduction. I've seen much more in the area of overtime.

6:42Elizabeth Ayoola:Well, Tom, taxes can be confusing, as you said earlier. And in the bid to encourage people to do it themselves, what are some best practices that people can keep in mind so that they can make filing their taxes a bit less stressful and also prevent mistakes? I'm going to tell you exactly what I do as a tax professional. Number one, start with last year. Now, last year would mean 2024. Look at what you had on your return for 2024. Now, some of these deductions we're talking about today, didn't exist in 2024, but that's a portion of your filing. So look at last year and say, oh yeah, I had interest from this bank or this brokerage account or whatever I had and start by looking at that data.

7:21I would also strongly suggest that people electronically file. You know, there are some software services out there that offer free filing. The IRS no longer has the direct file system. That also ended under the auspices of the one big beautiful bill. But there are still free file opportunities for those who qualify income wise and complexity of the return. But try to use electronic means, use direct deposit for refunds. And I will also mention that President Trump signed an executive order March, now a year ago, which said that Treasury is going to stop issuing physical check refunds. And they also don't want to continue to accept check payments.

8:01We can eliminate some of the risk of having things going through the U.S. mail, either from either a delay or being lost or destroyed, to go ahead and try to pay liabilities also by online means.

8:13Sean Pyles:It also makes the process so much faster, too, when you are filing online and you're setting a direct deposit. I found it to be pretty much instantaneous on my end. I've been educating my clients, especially older folks who are not comfortable with, quote unquote, the IRS going in their bank account. And they realize that we do have some control and we can schedule the payment. They'll be aware of it and all of that. And I was going to mention, too, and I agree with you, Sean, you found it to be a good experience, didn't you? Yeah, it was fine. As far as giving the IRS my money, it's OK. Right.

8:44But you can still wait. By the way, I think that's a misnomer with a lot of folks. The due date, as you mentioned at the opening of our podcast, was that it is April 15th. Just because you file your return today doesn't mean you have to pay it by April 15th. And that's what I find myself doing with clients is scheduling that payment. Now, when we're going back and we're reviewing last year's return, and you'll say this is the number one phrase in 35 years of doing taxes that people are famous for saying, I didn't get anything. What about this? Well, I didn't get anything. Hey, folks, we're in electronic age.

9:16So if you're receiving, for example, perhaps unemployment, when you signed up for unemployment, you probably clicked this little box which said you wanted paperless contact. Well, guess what? You may have received unemployment last year. You didn't receive a tax information document in the mail. It doesn't mean one exists. There's no requirement that I'm aware of that things must come through the U.S. mail. So again, thinking about what happened in your life this last year, you may in fact have to go and get those brokerage statements, those bank statements, the notion of unemployment benefits that you might have received so that you can have good input, which hopefully results in good output.

9:53Sean Pyles:I think that could be one downside to the movement toward electronic filing is that I actually really prefer getting all of my tax forms mailed to me so I can know that they're all there for the most part and then not have to remember my login for my brokerage account or my high yield savings account or whatever it might be, because that can just add more administrative burden if you're just trying to remember all of your passwords while you're just working to file your taxes. Yeah, you're absolutely correct. I mean, you know, in the example of unemployment, someone might have received benefits for just maybe in the early part of a year.

10:22And now we're talking about something from a year ago. And what did you use as a username and password? We find ourselves in the office. Can we access your account here? Oh, I don't know that I remember my password. That's a real common circumstance. But boy, you're right now. I did have some unemployment benefits last year. And, you know, another thing that the one big, beautiful bill has done, besides these obvious deductions that we're talking about, is the requirement to make sure that we have a Social Security number before we file. And probably the most common area would be when there was a new child born, you know, during the year.

10:54And do we have that Social Security number yet? So in most cases, when you're electronically filing, I can't imagine the return being able to be transmitted. In other words, good form, no diagnostics that are preventing transmission. I can't imagine that any software will allow a return to go into the system without a social on it. So I think it's more of the people who still maybe file by paper. And if the social security number is not there at the time of filing, then many of the credits will, in fact, be disallowed on that filing. So make sure we've got a social security number. And I think they use the term a social security number that makes one eligible to work, which I think is probably 99.9 % of the social security numbers out there that have been issued.

11:36So make sure we have that information and double check it. I do that with my clients. I talk about good intake results and good output. So I will tell people, hey, let's see those social security cards. Make a copy of them for me so we can verify, you know, the kids' full names and their social. and if someone, for example, had a marital status change, perhaps they changed their name.

11:56Elizabeth Ayoola:I think all of this just brings to mind the importance of being organized during tax season. And as you said, Tom, there is something to be said about looking back at last year, maybe creating a checklist. So that includes having your social security number in place, knowing your logins for all those important accounts, having your documents, whether they're digital or physical, in place to minimize that stress. I can't count on one hand the number of people who just bring in, and there are envelopes that haven't even been opened yet. Oh, we just put all this stuff in a folder and we bring it to Tom.

12:25You know, and in some of this - It's your job to open those envelopes. Exactly. You would be surprised to hear that once in a while, there'll actually be money, like a dividend check that came and they thought it was a government document. I say, here's a check, you know, for years or so. Surprise. That's still constructive receipt, as they say. Exactly. Constructive receipt is a good point. But Elizabeth, with your point is very well taken. Be organized. And another piece of advice I would have, don't press send, get up and walk away and come back again and look at it with a fresh set of eyes and then maybe press send.

12:57Sean Pyles:I like that because when I did my taxes, I did cloister myself away in the office for a couple hours on the Saturday morning and I just did it all in one go. And by the end, I was kind of exhausted and frustrated and just wanted to go about my day that I just hit submit. It was accepted. Everything was fine, but I probably could have benefited from just one breather and a final glance over before submitting it. Yeah, that's an excellent point. One other comment I wanted to make about acceptance with the idea when we transmit a return to the IRS, does it mean everything's over? We don't have any issues that the IRS could come back on?

13:31And that's not the case at all. And then finally, Elizabeth, you mentioned this at the open, when a return will reject saying that a social security number had already been used. Now, that could be something as simple as you have a semi-adult child, I will say that. They're away at school and they got together with their friends and they filed their returns on the weekend. Maybe they had a little job at the college or maybe off campus and they went ahead and didn't indicate that they were a dependent. And then mom and dad go and file the return, claiming the child. IRS rejects the return saying this social has already been used.

14:07Okay, that's an issue. The more nefarious one is when you get into issues of identity theft, where the bad guys, as I said, they got a match to the first four letters of the last name and the social. I describe that as the keys to the candy store. Now, they've gotten in. They've probably made up information that in no way reflects your world. Four children, mid-income that would qualify for an earned income credit, college credits and all this, and they're trying to generate$7 ,000 to$12 ,000 in refunds. funds, then the legitimate filer goes and files and it rejects. And you have a couple of options.

14:43One, you're probably a victim of identity theft. And you may have to then go and paper file. And you file that you think you're a victim of identity theft. Of course, with privacy laws, you really can't know who the bad guy is. We'll say it that way on the other end. But then you file that return in paper. Or there are some other options. But one of the things I would suggest for folks to do, and you can do that right now, and you don't have to be a victim of identity theft, is go to irs.gov. Don't go somewhere else that would charge money. And you go to get an IP pin, identity protection pin.

15:18We in the computer world understand the notion of two-factor authentication. It's akin to that. So now it takes more than the first four letters of your last name and the social. There's another number that has to match before you can get into the candy store, as the saying would be. And that's good for one year, for that tax filing year, correct? That's correct. And my understanding is that, and I haven't seen this otherwise, I think you can go back and say no, but Sean, that creates a situation where then annually, the IRS will actually mail to your last known address a new identity protection pin.

15:51Because you're right, they're good for one year. But once you get into that system, you will continue to receive those identity protection pins, not new ones each year, and they typically are sent out in January, but that will come through U.S. mail.

16:03Sean Pyles:Great. Okay. Well, Tom, I want to go deeper into deductions, specifically the standard deduction or itemized deduction, because a lot of folks aren't sure which might be best for them. So what might be your guidance on whether folks should choose itemized or standard, and does it come down to simply which gives you the bigger refund? It really does, Sean. It comes down to that. And I've often told clients they'll be in the first five minutes and they say, well, are we going to go short form or long form this year? Long form meaning itemized, short form meaning standard deduction. And I love to tell them, I said, well, that's not decided by how tired I am.

16:36It's really determined by what you actually have. And I will tell you, since the Tax Cut and Jobs Act came on in 2018, in my world where we probably had prior to that law, 80 to 85 % of clients itemized with the Tax Cut and Jobs Act coming along and basically doubling the standard deductions, it's probably just been the opposite. 80 % of people now take the standard deduction and less and less itemize. But what I've asked clients to do during that time is to still keep track of those expenses that could lead to itemized deductions, like medical expenses out of pocket, your state and local taxes, your mortgage interest, your charitable contributions.

17:16Perhaps you've had gambling winnings and gambling losses. because I'll tell you, one of the factors of the one big beautiful bill was to take the state and local tax deduction. That would be your state withholding, your state balance is due if you're in that type of a state, perhaps you have personal property tax. And that was capped at$10 ,000. Well, for the next four years, the cap is now$40 ,000. So as we predicted early on, we being NATP, we thought we would see more people qualifying to itemize deductions in filing their 2025 tax return. And that's exactly been the experience.