The Department of the Treasury and the Internal Revenue Service (IRS) have issued final regulations implementing the “No Tax on Tips” provision under the One, Big, Beautiful Bill. These rules clarify which workers qualify and what constitutes “qualified tips” eligible for a tax deduction.

Overview of the Final Regulations

After receiving over 300 public comments and holding a hearing in October 2025, the IRS finalized guidance to ensure consistent application of this tax benefit. The regulations are designed to support a wide range of tipped workers and provide clearer rules for compliance.

Occupations Eligible for Tip Deduction

The final regulations identify more than 70 tipped occupations using the Treasury Tipped Occupation Code system. These roles are grouped into eight categories:

• 100s – Beverage and Food Service
• 200s – Entertainment and Events
• 300s – Hospitality and Guest Services
• 400s – Home Services
• 500s – Personal Services
• 600s – Personal Appearance and Wellness
• 700s – Recreation and Instruction
• 800s – Transportation and Delivery

Notably, the final rules expand eligibility to include visual artists and floral designers (personal services) and gas pump attendants (transportation and delivery).

What Counts as “Qualified Tips”?

To claim the deduction, tips must meet specific criteria:

• Form of Payment: Must be cash or cash equivalents (e.g., credit/debit card, checks, gift cards, or mobile payments)
• Source: Must come directly from customers or through tip-sharing arrangements (e.g., tip pools)
• Voluntary Nature: Must be freely given by the customer

Importantly, mandatory service charges do not qualify unless customers have the option to modify or decline them.

Reporting Requirements

Only tips that are properly reported are eligible for the deduction. This includes tips recorded on:

• Form W-2
• Form 1099-NEC
• Form 1099-MISC
• Form 1099-K
• Form 4137 (for unreported tips)

Both employees and self-employed individuals, including gig workers, may qualify if they meet all requirements.

Special Consideration for Self-Employed Individuals

For self-employed taxpayers, the deduction is limited to their net income, preventing the deduction from exceeding business earnings.

Key Takeaway

The final “No Tax on Tips” regulations provide expanded opportunities for workers across multiple industries while setting clear standards for what qualifies. Proper classification, documentation, and reporting are essential to fully benefit from this provision.

For guidance on eligibility or claiming this deduction, consulting a tax professional can help ensure compliance and maximize available benefits.

As the April 15 deadline approaches, taxpayers who need more time to complete their federal returns can request an extension to file until October 15, 2026. However, the extension request must be submitted by April 15, 2026 to avoid penalties.

Extension to File vs. Time to Pay

An extension provides additional time to file, not to pay.

To avoid penalties and interest:

• Estimate your total tax liability
• Subtract payments already made (withholding or estimated payments)
• Pay any remaining balance by April 15

How to Request an Extension

The IRS offers several simple options:

• IRS Free File: Submit an extension electronically at no cost
• Free File Fillable Forms: Complete and e-file Form 4868
• Pay Online: Use IRS Direct Pay, Online Account, or EFTPS and select “extension”
• Mail Form 4868: Submit a paper form if preferred

Paying online and selecting “extension” automatically grants the extension—no additional form required. Be sure to keep your confirmation.

Automatic Extensions for Certain Taxpayers

Some individuals receive extra time automatically:

• Military stationed abroad: File by June 15 (payment still due April 15)
• Combat zone service members: At least 180 days after service ends
• Taxpayers living abroad: Automatic extension to June 15 (interest applies after April 15)
• Disaster-affected taxpayers: Additional time granted automatically in qualifying areas

Payment Options

Available IRS payment methods include:

• IRS Online Account
• Direct Pay
• Electronic Federal Tax Payment System (EFTPS)
• Credit/debit card or digital wallet

Key Takeaway

Filing an extension can help you submit a more accurate return, but it does not delay your payment obligation. Ensuring you pay what you owe by April 15 is essential to minimizing penalties and interest.

If you need help estimating your tax liability or filing an extension, consult a qualified tax professional to stay compliant and avoid surprises.

IRS Staffing Cuts Are Slowing Refunds—Here’s What Taxpayers Need to Know

If you’re waiting on a tax refund—especially from an amended return—you may be in for a longer wait.

A recent government watchdog report shows that staffing shortages at the IRS have led to a backlog of nearly 590,000 amended tax returns, raising concerns about delayed refunds for hundreds of thousands of Americans.

What’s causing the backlog?

The IRS workforce has been reduced by about 27 percent, according to the latest figures. These cuts followed layoffs carried out by the Department of Government Efficiency (DOGE), which was overseen by Elon Musk during the early days of the Trump administration.

With fewer employees available to process returns and answer questions, the agency is struggling to keep up with the volume of work—especially paper filings and amended returns, which require manual review.

Who is most affected?

Taxpayers who file amended tax returns face the biggest risk of delays. Amended returns are typically filed when someone needs to correct mistakes related to income, deductions, dependents, tax credits, or refund amounts.

According to an analysis of the Treasury report, these returns are piling up faster than the IRS can process them.

To put the problem in perspective:

• The current backlog is about 20,000 higher than last year
• It’s roughly four times larger than it was in 2019, before the pandemic

Customer service is also taking a hit

The IRS is also answering fewer phone calls. The watchdog report found that the agency lowered its customer service goal from 85 percent of calls answered to just 70 percent—meaning roughly 3 out of every 10 calls may go unanswered.

For taxpayers trying to check on a delayed refund, that can add another layer of frustration.

Delays are costing the IRS billions

Ironically, slower processing doesn’t just hurt taxpayers—it also costs the government money.

By law, the IRS must pay interest on refunds issued more than 45 days after the filing deadline. In 2025 alone, those interest payments totaled more than $2.6 billion, according to the Treasury report.

The interest rate the IRS pays on late refunds is 7 percent for the first three months of 2026, meaning longer delays could drive that cost even higher.

The bottom line

With fewer workers and growing backlogs, the IRS is under pressure—and taxpayers may feel the effects through delayed refunds and reduced customer service.

If you’re filing an amended return this year, experts suggest:

• Filing as early as possible
• Keeping copies of all documents
• Using online IRS tools to track your return when available

While staffing challenges continue, patience may be required—but the financial and service impacts are already adding up for both taxpayers and the government.

The Internal Revenue Service (IRS) began accepting 2025 tax year returns on January 26, 2026. For most individual taxpayers, this means you can now start submitting your federal return electronically personally or with the help of a tax professional.

Here’s everything you need to know about IRS updates and how newly enacted tax provisions might affect you:

Free File & Filing Options 

Those with adjusted gross income of $89,000 or less are eligible to use the IRS Free File program to prepare and file a federal return online at no cost. Unlike some past years, the IRS Direct File tool is not available for 2026. Taxpayers who want a free option will need to rely on Free File, IRS Free Fillable Forms, or volunteer programs like VITA and TCE.

Major Tax Law Changes

This tax season reflects major updates from the One Big Beautiful Bill Act and other recent legislation. These changes affect deductions, credits, reporting rules, and more — and getting them right can mean a bigger refund or a smaller tax bill. Here are a few highlights:

• Bigger SALT Deduction Cap: The state and local tax deduction cap has increased from $10,000 to $40,000 for 2025 returns. 
• Child Tax Credit Updates: The maximum Child Tax Credit went up for 2025 returns and has slightly different income phase-outs. 
• Senior Bonus Deduction: Taxpayers 65 and older can claim up to an extra $6,000 deduction through 2028 (subject to income limits). 
• 1099-K Reporting Rule Reversion: Platforms issue Forms 1099-K only under the higher $20,000/200-transaction threshold. 

These changes can impact everything from filing strategy to what forms you complete — and may require filing new schedules introduced for this season.

IRS Tools & Preparation Tips

To make the process smoother and help avoid delays:

• Open or log into your IRS Online Account: You can view your tax records, payment history, and important notices anytime. 
• Use direct deposit for refunds: The IRS has begun phasing out paper refund checks and strongly encourages direct deposit for faster, more secure refunds. 
• Gather forms early: W-2s, 1099s, digital asset transaction records, and other paperwork are key to accurate filing. 
• Be aware of scams: The IRS will never initiate unscheduled calls or texts; if in doubt, go to IRS.gov directly. 

What This Means for Taxpayers

The 2026 filing season is shaped by substantial tax law changes that affect millions of Americans. Whether you’re a first-time filer, a seasoned taxpayer, or preparing returns for a family, understanding the landscape will save you time and potentially maximize your refund.

There’s also growing conversation among tax professionals about IRS staffing levels and system readiness, so patience and organization are essential this season.

Final Takeaway

Filing season 2026 is here — earlier and more complex than many recent years. With changes to deductions, credits, and filing tools, preparation is the key to success. Use the IRS free resources, get your documents organized, and don’t wait until April to start — thousands of refunds are processed in just weeks, and early filing can help you get yours sooner.