Tax practitioners are set to face a uniquely challenging 2026 tax season, shaped by major new retroactive tax legislation, ongoing IRS resource constraints, and the critical need for proactive client support. Experts shared insights and strategies for navigating these complexities during a January 21 webinar hosted by Accounting Today.
One Big Beautiful Tax Season
Panelists agreed that the primary challenge this season will be due to the One Big Beautiful Bill (OBBBA). The law, which makes many 2017 Tax Cuts and Jobs Act provisions permanent, made many of its key provisions retroactive to tax year 2025. This, the panel said, has left practitioners and software developers scrambling to adapt.
Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals, called it the “number one issue that’s on practitioners’ minds.”
He highlighted new deductions for tips, overtime, and personal interest on an auto loan. He cautioned that “we’re in a transition year” and that practitioners will need to rely on their “best effort” due to the lack of initial guidance. He recommended professionals use the Fair Labor Standards Act to define overtime when working with clients seeking to claim the new benefit.
O’Saben also clarified that the names of the “no tax on tips and overtime” provisions leave out crucial context for how they work. “It is a deduction for tips. It is a deduction for overtime,” he explained, stressing that practitioners will need thorough documentation to support these new claims. “Good intake will equal good output,” he advised.
Jennifer MacMillan, president of the National Association of Enrolled Agents, said the “no tax” naming “is a misnomer” that will lead to confusion, such as with Social Security. “All these seniors are going to come in and say, ‘My Social Security shouldn’t have any tax on it.’ So why are you putting it on my forms?” she said.
Given the retroactive nature of the law, which was enacted July 4 last year, software may not be fully prepared to implement its changes. Annie Schwab, franchisee operations manager at Padgett, said this is “one of the reasons that the IRS is granting such leniency when trying to determine no tax on tips, no tax on overtime.” While the IRS has been making progress in recent months with the release of initial guidance, “that doesn’t mean that all the forms are finalized for filing,” Schwab said. “There could be software issues.”
IRS Performance Expectations
Despite deep IRS staff reductions and budget recissions, panelists expressed cautious optimism about the agency’s performance. “I am really surprised that they’ve done so well. They kept things rolling during the shutdown, which surprised me,” MacMillan said. However, she also warned that the loss of experienced staff remains a concern.
Schwab pointed to a “formula driven” success model for the IRS coined by former Commissioner Danny Werfel that requires the right people, money, and technology. Although technology has seen great improvements with online accounts and chatbots, the agency is “a little weak” on people and money following an overall 25% staff reduction last year, with a possible $11.6 billion clawback of Inflation Reduction Act operating funds on the table as part of the government funding framework.
“That concerns me,” Schwab said. Yet, she saw the tax season’s on-time start date of January 26 as a positive sign. MacMillan also warned that new AI-driven programs could lead to more audits in certain areas.
To manage interactions with the agency, the panel strongly advised that tax professionals encourage clients to set up their own online IRS accounts. “It is free to do,” said Schwab, explaining that clients can make payments, set up installment agreements, view notices, and get copies of transcripts. “I would encourage clients, especially those who are tech savvy, to jump up on there and get their account because it’ll prevent the back and forth with you looking for something.”
This self-service can prevent unnecessary and time-consuming phone calls to an understaffed agency. O’Saben agreed, emphasizing that the best way to approach IRS interactions is to avoid the need for them at all. “If we can work on good input from the outset and not expect that we’re going to have to make contact with the IRS … I think that will help them,” he said.
Client Management
The panel agreed on the importance of proactive client management. This starts with communication, O’Saben stated, meaning urging practitioners to manage client expectations about filing timelines and potential refund delays.
Dan Hood, the webinar’s moderator and editor-in-chief of Accounting Today, added, “If you think you’ve communicated enough, then communicate three times more, and then add one more communication on top of it, because you cannot over-communicate.”
Annual engagement letters are another essential tool. “Be very clear about your expectations and what an engagement looks like with you,” Schwab offered, suggesting that letters detail what information is needed, in what format, and by when. They also help set boundaries and avoid scope creep.
MacMillan shared her strategy of keeping a “naughty list” of difficult clients and either raising their fees significantly or terminating the relationship. “[E]ither fire them outright if you really don’t want to work with them,” she said. Otherwise, “just raise their fees and let them know in advance that your fees are going up,” she said, adding that it is okay to be selective and get paid “what you want to be paid — this is tough work.”
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