Direct answer: The IRS says the Working Families Tax Cuts helped it collect a record $5.6 trillion in FY2026 while sending out bigger, faster refunds to more people — it does not require most taxpayers to do anything new.
What did the IRS actually announce?
On October 29, 2026, the IRS released IR-2026-129, announcing in FY 2026, the IRS collected a record-setting $5.6 trillion in taxes, an increase of nearly 5 percent from the previous year, representing most of the revenue that supports the operations of the U.S. government. At the same time, the average tax rate paid by taxpayers declined for all income levels for returns filed in 2026. One outlet reporting on the release noted the overall average rate fell to 12.6%, a 4% drop from 2025. The agency credits this combination of higher collections and lower average rates to the Working Families Tax Cuts, the tax law passed in 2025.
Who does the Working Families Tax Cuts news affect?
The announcement is broad — it covers individual filers, seniors, tipped and hourly workers, and parents — but the dollar impact varies a lot by situation. Separate Treasury data on the law’s first year found tax relief was concentrated among American families and workers earning under $200,000, with 96% of filers receiving a tax cut earning less than $200,000. The IRS release itself highlighted that taxpayers earning less than $100,000 saw the largest percentage increase in refunds, according to reporting on the data.
What are the “No Tax on Tips” and “No Tax on Overtime” deductions?
These are two of the most talked-about pieces of the law. Per the IRS’s own guidance:
| Provision | Maximum deduction | Phase-out starts (MAGI) |
|---|---|---|
| No Tax on Tips | $25,000/year | $150,000 single / $300,000 joint |
| No Tax on Overtime | $12,500 single / $25,000 joint | $150,000 single / $300,000 joint |
Both deductions are available whether a filer itemizes or takes the standard deduction, the deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers), and both only apply to income that is properly reported on tax forms — they are not automatic exclusions from a paycheck.
How much bigger are refunds in 2026?
The IRS reported several year-over-year improvements for the 2026 filing season:
- The total dollar amount of refunds claimed increased by 17 percent over last year and the average refund was up by 11 percent with about 90 percent of filers who filed electronically receiving refunds in less than 21 days.
- The total amount of refunds dispersed to Americans increased by over 20 percent from 2025 to 2026.
- This filing season, 12 percent more refunds were issued via direct deposit compared to last year.
What are Trump Accounts, and do they affect my kids?
The law also created a new savings vehicle for children. The IRS says President Trump’s historic Working Families Tax Cuts also included the creation of Trump Accounts, individual investment accounts for children under the age of 18 designed to grow with the U.S. economy and build long-term savings, and today, nearly 70 million Trump Accounts are open for all children. Of those, 27 million have already received funds from families, friends, generous donors, and the U.S. government, which contributes $1,000 to each child born between 2025 and 2028, according to the release.
Do I need to do anything differently when filing?
For most people, the answer is no special action — these provisions are built into the standard tax forms and instructions. That said, workers who earn tips or overtime may want to confirm their employer is reporting that income correctly, since the IRS has noted that W-2 and 1099 forms were still being updated to separately show tip and overtime amounts for the first year the deductions applied. Anyone unsure whether a deduction or credit applies to their situation can check the IRS’s own Working Families Tax Cuts pages or speak with a tax professional — this article is general information, not personalized tax advice.
Where can I verify this information myself?
The original IRS news release and its companion pages on the Working Families Tax Cuts are the primary sources for all figures cited above, and they’re a reasonable starting point for anyone who wants more detail or has a situation not covered here.
Sources
- IRS: IRS achieved historic performance in 2026 for American taxpayers (IR-2026-129)
- IRS: Working Families Tax Cuts – Individuals and workers
- IRS: How to take advantage of no tax on tips and overtime
- U.S. Treasury: A Look at the First-Year Results of the Working Families Tax Cuts
- WKBW/Scripps News: IRS reports record $5.6 trillion in tax collections, historic refunds
This article is for educational purposes only and isn't legal, financial, or tax advice. See our Disclaimer for details.
