How 2025–2026 tax law changes, IRS procedural shifts, and operational bottlenecks (PATH Act, ID verification, Direct File end, Schedule 1-A, TOP) are driving larger refunds but more manual reviews, offsets, and timing uncertainty — with strategies to track and resolve holds.

Rules, Refund Holds & Delays

As the 2025–2026 tax seasons unfold, taxpayers are navigating a landscape marked by record-high refunds paired with unprecedented complexity and uncertainty. This paradox stems from sweeping tax law expansions and evolving IRS operational reforms that, while unlocking larger refunds, also trigger more frequent refund holds, manual reviews, identity verification delays, and refund offsets. Compounding these challenges is a resurgence of tax-related scams and aggressive refund-advance marketing, requiring taxpayers to exercise heightened vigilance and strategic action.

Larger Refunds, Greater Complexity: The 2025–2026 Tax Environment in Focus

The interplay of enhanced tax benefits and procedural safeguards is reshaping the refund experience, creating both opportunity and risk.

Expanded Credits Drive Historic Refund Levels
Average IRS refunds have surged by approximately 10% this tax season, with taxpayers receiving more than $3,800 on average, reflecting inflation-adjusted and broadened credits.
The Child Tax Credit (CTC) continues to deliver substantial returns, averaging around $2,200 per child, sustained by expanded eligibility that includes mixed-status families. The Earned Income Tax Credit (EITC) also grew federally and through state-led outreach efforts, such as Maryland’s Earned It program, which boosts participation among low- and moderate-income workers.
Moreover, state-level credits like Washington’s Working Families Tax Credit, now up to $1,330, and a wave of new local tax credits in California add significant refund amounts but increase filing complexity and administrative burdens.
Schedule 1-A and New Deduction Provisions Amplify Filing Demands
The introduction of Schedule 1-A (Form 1040) consolidates new deductions including the Qualified Overtime Compensation Deduction (QOCD), tip income exclusions, and other targeted breaks for seniors and specific worker groups. While these deductions enhance refund potential, they also raise IRS scrutiny, requiring meticulous recordkeeping and often triggering manual reviews.
The SALT deduction cap increase to $40,000 temporarily benefits taxpayers in high-tax states but demands additional verification. Inflation-driven rises in the standard deduction and IRA contribution limits further complicate filings.
IRS Direct File Program Ends, Increasing Reliance on Paid Preparers and Software
The discontinuation of the IRS Direct File program in 2026 forces taxpayers to rely on commercial tax software or professional preparers. This shift introduces higher filing costs and risks of fraud from “ghost preparers”—unlicensed individuals filing returns without authorization. The IRS’s E-File Provider Search Tool is a critical resource for verifying preparer credentials and avoiding costly errors or scams.

Procedural Shifts and Bottlenecks: Refund Timing and Review Challenges

Despite increased refund sizes, taxpayers face growing procedural hurdles that delay and complicate refund receipt.

PATH Act Refund Hold Remains Firm: March 2, 2026 Release Date
The Protecting Americans from Tax Hikes (PATH) Act continues to mandate refund holds for filers claiming the EITC and Additional Child Tax Credit (ACTC), with a confirmed refund release date of March 2, 2026. This delay, intended to combat fraud, requires taxpayers to manage expectations despite average combined EITC/ACTC refunds reaching $8,046.
Direct Deposit-Only Refunds Now Universal
To combat fraud and expedite delivery, the IRS no longer issues paper refund checks. Taxpayers without bank accounts must open one or obtain a prepaid debit card early to avoid refund withholding or further delays.
Rising CP79 Notices and “Pending Review” Refund Statuses
Taxpayers are experiencing a surge in CP79 notices, which indicate credit denials or requests for additional documentation related primarily to refundable credits. Additionally, “pending review” statuses are increasingly common, often extending refund timelines. Timely, thorough responses to IRS inquiries are essential to preserving credits and accelerating refunds.
ID.me Identity Verification Backlogs Persist
The IRS’s multi-factor ID verification system, ID.me, continues to face backlogs during peak filing periods. Although improvements have been made, delays in completing identity verification remain a top cause of refund processing stalls, underscoring the importance of early verification.
Treasury Offset Program (TOP) Enforcement Expands
The IRS has intensified refund offsets for outstanding debts including federal student loans, unpaid child support, back taxes, and state tax liabilities. Joint filers are particularly vulnerable, as one spouse’s debts can offset the entire refund. Injured spouses should promptly file Form 8379 to recover their portion.
Manual Reviews and Audit Risks Increase with Complex Claims
Returns claiming multiple refundable credits or new Schedule 1-A deductions face elevated IRS scrutiny. Manual reviews require detailed supporting documentation—such as employer certifications for QOCD—and increase audit risk, further prolonging refund timelines.
State-Level Backlogs and Credit Complexity Compound Refund Delays
High-volume states like California, New York, Michigan, and New Jersey continue to confront significant refund delays driven by fraud detection and the administrative complexities of expanded SALT caps and proliferating local credits.

Recent Developments: Heightened Awareness, Scam Prevention, and IRS Initiatives

Emerging trends and IRS responses are shaping taxpayer experience and protections:

IRS Launches Centralized Tax Fraud and Scam Reporting Hub
In response to a dramatic rise in IRS impersonation scams, the IRS unveiled a streamlined Tax Fraud and Scam Reporting Web Page. This platform allows taxpayers to report suspicious contacts and access official guidance to distinguish legitimate IRS communications.
The IRS emphasizes: “Never respond to unsolicited calls, emails, or texts claiming to be from the IRS.”
Tax Refund Advance Marketing Returns Amid Larger Refunds
With refund amounts increasing, tax refund advance ads have surged, enticing taxpayers with early cash offers often accompanied by high fees and interest. Consumer advocates warn these products can erode refund value and recommend taxpayers carefully evaluate terms before accepting advances.
California’s Local Tax Credit Explosion
Thousands of California taxpayers remain unaware of new local tax credits that can significantly boost refunds but also complicate returns and delay processing. Outreach efforts aim to improve awareness, but the complexity risks filing errors and refund holds.
Consumer Tech Guidance to Protect Refunds
Taxpayer groups advise using official IRS tools—Where’s My Refund?, Individual Online Account, IRS2Go—to monitor refunds securely. They also stress multi-factor authentication, cautious password management, and avoiding sharing sensitive data over phone or email to reduce phishing and fraud risks.

Practical Strategies for Taxpayers to Navigate 2025–2026 Successfully

Given the intricate tax and IRS environment, adopting proactive measures is crucial:

Complete Early ID.me Verification
Starting identity verification well before filing can prevent refund-processing delays linked to verification bottlenecks.
File Electronically and Choose Direct Deposit
E-filing combined with direct deposit remains the fastest, safest refund method. Paper returns or alternative refund delivery options increase fraud and delay risks.
Regularly Monitor Refund Status
Use IRS digital tools to track refund progress and identify holds or offsets promptly. Signing up for email or text alerts when available enhances real-time awareness.
Respond Promptly and Completely to IRS Notices
Timely, thorough responses to CP79 and other IRS letters safeguard credits and reduce refund delays.
File Form 8379 for Injured Spouse Claims
To recover refund shares offset due to a spouse’s debts, injured spouses should submit Form 8379 without delay.
Maintain Comprehensive Documentation
Retain copies of all tax returns, employer certifications (especially for Schedule 1-A claims), IRS correspondence, and identity verification proofs to support audits and dispute resolution.
Verify Tax Preparer Credentials
With the end of Direct File, confirm preparer legitimacy via the IRS E-File Provider Search Tool to avoid ghost preparer fraud.
Leverage Taxpayer Advocate Service and Free Assistance
The Taxpayer Advocate Service (TAS) assists taxpayers facing prolonged delays or hardships. VITA and TCE programs provide free expert help for eligible filers.
Manage Debts Subject to TOP Proactively
Monitor debts, communicate with agencies, and consider installment plans or offers in compromise to minimize refund offsets.
Stay Alert to Scams and Use Official IRS Channels Only
Report suspicious contacts immediately through the IRS scam reporting hub; never disclose personal information to unsolicited callers or emails.

Conclusion: Vigilance and Preparation Are Key to Maximizing Refunds and Minimizing Risks

The 2025–2026 tax filing seasons offer historically large refunds fueled by expanded credits, deductions, and state-level incentives. Yet these benefits come with increased complexity, mandatory refund holds, identity verification hurdles, and intensified IRS scrutiny.

Taxpayers must embrace early identity verification, accurate electronic filing with direct deposit, active refund monitoring, and prompt, complete responses to IRS communications to successfully navigate this challenging landscape. Leveraging IRS digital resources, free assistance programs, and official scam prevention guidance can help maximize refunds while minimizing delays, offsets, and fraud risks.

In a tax environment shaped by the PATH Act, ID.me verification, the end of Direct File, Schedule 1-A deductions, and the Treasury Offset Program, informed and proactive taxpayers are best positioned to secure their financial returns without undue delays or complications.

Essential IRS and State Resources

By understanding the evolving tax code, preparing for IRS procedural changes, and exercising caution against scams and fraud, taxpayers can confidently navigate the 2025–2026 filing season to maximize their refunds while managing emerging risks.

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