How 2025–2026 tax law and IRS procedural changes (credits, SALT, QOCD, ID verification) are driving bigger refunds while also increasing manual reviews, offsets, and collection actions—and what taxpayers can do to track and resolve holds.

Rules, Collections & Refund Holds

As the 2025–2026 tax seasons progress, American taxpayers find themselves navigating a complex and evolving tax landscape marked by historically expanded tax benefits alongside heightened IRS procedural enforcement and operational changes. This environment is driving significantly larger average refunds but also more frequent refund holds, manual reviews, and intercepts, challenging taxpayers to stay informed and proactive to secure their full benefits without costly delays.

Expanded Tax Benefits Continue to Boost Refunds

Building on landmark 2025 provisions, several key tax law changes continue to enhance refund amounts for millions of Americans in 2026:

Child Tax Credit (CTC) Expansion: The inflation-indexed CTC now averages around $2,200 per qualifying child, up from prior years. Importantly, the IRS’s refined guidance on eligibility—including provisions for families with mixed Social Security Number (SSN) and Individual Taxpayer Identification Number (ITIN) statuses—has broadened access to the credit, benefitting millions more households.
Fully Inflation-Indexed EITC and Premium Tax Credit (PTC): These credits retain their real value amid rising costs of living, significantly increasing refunds for low- and moderate-income taxpayers. However, the IRS’s intensified scrutiny under the PATH Act’s anti-fraud mandate means many returns claiming EITC and PTC face longer processing times and more manual reviews.
Qualified Overtime Compensation Deduction (QOCD): Now well established for 2026, this deduction excludes certified overtime pay from taxable income, often increasing refunds by hundreds or even thousands of dollars. Challenges remain, however, as inconsistent employer certification processes contribute to refund processing delays.
SALT Deduction Cap Raised to $40,000: The state and local tax (SALT) deduction limit quadrupled from $10,000 to $40,000 through 2026, delivering substantial tax relief to residents of high-tax states such as California, New York, and New Jersey.
No-Tax Tip Income Exclusion (Effective 2026): Approximately $1,400 of tip income per taxpayer is now exempt from federal income tax, providing a meaningful boost to service-sector workers’ refunds.
Inflation-Adjusted Standard Deductions and Tax Brackets: For example, the married filing jointly standard deduction increased nearly $1,000 in 2026, further reducing taxable income.

Together, these provisions have pushed the average refund more than 10% higher than in past years, despite a modest decline in early filers. Early filers tend to claim multiple credits, making their returns more likely to receive intensive IRS scrutiny.

IRS Enforcement and Procedural Changes Intensify Refund Delays and Collection Actions

While tax benefits have expanded, the IRS has simultaneously increased enforcement and added procedural complexity, resulting in more refund holds, manual reviews, and interceptions:

Surge in CP79 Credit-Denial Notices: The IRS is issuing a growing number of CP79 notices challenging refundable credits—especially EITC and the Additional Child Tax Credit (ACTC). Taxpayers must respond quickly and thoroughly to avoid credit denials and extended refund delays.
Ongoing ID.me Identity Verification Backlogs: The mandatory multi-factor authentication process continues to be a significant bottleneck. Taxpayers report wait times stretching multiple weeks, particularly during peak filing periods. The verification includes document uploads, phone checks, and confirmation of IRS test deposits—steps essential to prevent fraudulent filings but a source of frustration.
Expanded Treasury Offset Program (TOP) Scope: TOP now intercepts refunds to cover a wider array of debts, including delinquent student loans, unpaid child support, outstanding state income taxes, and certain federal agency debts. Joint filers are especially vulnerable; if one spouse has qualifying debts, the entire refund can be seized.
Faster Injured Spouse Claim Processing (Form 8379): In response to expanded offsets, the IRS has accelerated processing of injured spouse claims, enabling non-debtor spouses to reclaim their share of intercepted refunds more quickly than in previous years.
Introduction of Variable-Payment Installment Agreements (VPIAs): Designed for taxpayers with irregular incomes, such as gig economy workers, VPIAs offer flexible repayment terms of up to 72 months with mandatory direct debits. This innovation aims to reduce defaults and provide manageable tax debt solutions.
Heightened Manual Reviews and Fraud Audits: To combat fraud risks associated with expanded refundable credits, the IRS has significantly increased manual return reviews and audits, especially for returns claiming multiple credits. This has contributed to longer refund processing times and underscores the importance of comprehensive documentation.
New IRS Paper Refund Processing Rules for 2026: Recent IRS announcements reveal that paper refunds—still used by some taxpayers—face new thresholds and longer processing times in 2026. The IRS now requires additional documentation for paper refund issuance, and the standard processing window has lengthened, reflecting tighter anti-fraud controls.
Clarified Reasons Refunds May Be Seized: The IRS has published guidance listing nine legitimate reasons for refund seizures, ranging from outstanding federal and state debts to federal agency offsets and identity theft flags. This transparency helps taxpayers anticipate potential refunds interceptions and take preemptive steps.

Enhanced IRS Digital Transparency and Taxpayer Tools Empower Refund Tracking

To help taxpayers manage these complexities, the IRS has upgraded its digital platforms and launched new resources:

IRS Individual Online Account (IOA): Offers real-time updates on refund status, account balances, notices (including CP79), and detailed offset codes that specify types of debts leading to refund reductions.
Where’s My Refund? (WMR): Now provides enhanced messaging explaining causes of refund holds or offsets, with clear instructions for next steps.
Get Transcript Tool: Includes new transcript codes distinguishing federal tax debt offsets from other refund adjustments, aiding taxpayers’ understanding of their refund status.
IRS2Go Mobile App: Push notifications alert taxpayers to refund status changes, identity verification requests, and account alerts, improving timeliness and accessibility.
Centralized IRS Tax Fraud and Scam Reporting Hub: Launched in 2026, this portal consolidates multiple fraud reporting channels into a single, user-friendly platform, expediting IRS responses and encouraging timely reporting of suspected scams.

Practical Guidance for Taxpayers to Navigate Holds and Maximize Refunds

In this environment of amplified benefits and enforcement, taxpayers can take proactive steps to reduce delays and protect their refunds:

Initiate Identity Verification Early: Begin the ID.me multi-factor verification process well before filing to avoid bottlenecks.
Closely Monitor Refund Status: Regularly check IRS digital tools—Where’s My Refund?, IOA, and Get Transcript—to track refunds and detect holds or offsets promptly.
File Form 8379 Immediately if Refund Is Intercepted: Joint filers whose refunds are offset due to a spouse’s debts should submit the Injured Spouse Allocation form without delay to reclaim their rightful portion.
Respond Promptly and Fully to CP79 and Other IRS Notices: Timely and comprehensive responses are critical to prevent denial of credits and longer refund delays.
Maintain Comprehensive Documentation: Preserve copies of tax returns, employer certifications (for QOCD), IRS notices, identity verification communications, and payment records to support claims and audits.
Utilize Taxpayer Advocate Service (TAS): TAS offers confidential assistance for taxpayers facing financial hardship, prolonged refund delays, or complex disputes—particularly valuable for vulnerable or first-time filers.
Consider Offer in Compromise (OIC) or Variable-Payment Installment Agreements (VPIAs): Taxpayers with outstanding tax debts should evaluate these options to achieve manageable payment plans and avoid refund seizures.
Stay Alert to Scams: Only trust official IRS communications sent by mail. Report suspicious contacts via the IRS Tax Fraud and Scam Reporting Hub and notify TIGTA, FTC, BBB, and AARP to protect personal information.

Conclusion

The 2025–2026 tax seasons mark a critical turning point where robust tax relief measures coexist with intensified IRS enforcement and procedural complexity. While expanded credits, higher SALT caps, and new deductions have fueled record refund growth, taxpayers face a more vigilant IRS environment characterized by refund holds, identity verification challenges, and expanded refund interceptions.

Success in this evolving landscape demands early preparation, active monitoring, prompt responses to IRS notices, and savvy use of IRS digital resources and advocacy services. Taxpayers who embrace these strategies will be best positioned to maximize their refunds, minimize delays, and navigate the complexities of the modern tax system.

Key Resources for Taxpayers

By remaining informed, organized, and proactive, taxpayers can confidently navigate the expanding benefits and evolving enforcement procedures of the 2025–2026 tax seasons—ensuring they receive the maximum refunds they are entitled to, while minimizing the impact of refund holds and collection actions.

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