Is there really no tax on tips now?

Not exactly. Qualified tips can be deducted on Schedule 1-A, up to $25,000 a year from 2025 through 2028, and the deduction phases out above $150,000 of modified adjusted gross income ($300,000 for joint filers). Tips still have to be reported.

Can I take the new senior deduction if I take the standard deduction?

Yes. The Schedule 1-A deductions, including the extra $6,000 for each person 65 or older, can be claimed whether you itemize or take the standard deduction. The senior deduction phases out above $75,000 of modified adjusted gross income ($150,000 for joint filers).

Do I have to report side income if I did not get a 1099-K?

Yes. The IRS says all income is taxable unless the law says otherwise, even without a Form 1099-K. The higher $20,000 and 200-transaction threshold only changes when platforms must send the form.

How will I get my refund if I do not have direct deposit?

The IRS will process your return and send Notice CP53E asking for banking information. If you do not respond and nothing else is wrong with the return, the IRS says the refund will be released as a paper check after six weeks.

Tax Changes for 2025 and 2026 Returns, Houston

What is Schedule 1-A?

Schedule 1-A is the new IRS form for four deductions created by the 2025 tax law. The IRS says it "was created to calculate and claim four new tax deductions," and you attach it to Form 1040, 1040-SR or 1040-NR, per the IRS Schedule 1-A fact sheet.

You can claim these deductions whether you take the standard deduction or itemize. That matters, because most households take the standard deduction. For 2025 it is $31,500 for married couples filing jointly, $15,750 for single filers and married people filing separately, and $23,625 for heads of household, per the IRS Working Families Tax Cuts page.

All four deductions phase out at higher incomes, so the amount you can take depends on your modified adjusted gross income. If you want someone to run the numbers, that is part of individual tax preparation.

How do the tips and overtime deductions work?

Both are deductions from income, effective 2025 through 2028, with caps and income limits:

Qualified tips: employees and self-employed people may deduct qualified tips. The maximum annual deduction is $25,000. It phases out for modified adjusted gross income over $150,000 ($300,000 for joint filers).
Qualified overtime: you may deduct the portion of qualified overtime pay the law covers. The maximum is $12,500 ($25,000 for joint filers), with the same $150,000 and $300,000 phaseout points.

For both, the person who received the income needs a Social Security number valid for employment, per the Schedule 1-A fact sheet. Payers now have new boxes for tips and overtime on Forms 1099-NEC and 1099-MISC, per the 2026 instructions for those forms. If you are self-employed and earn tips, see self-employed tax preparation.

Who can take the car loan interest and senior deductions?

Both run from 2025 through 2028.

Car loan interest: up to $10,000 a year of interest on a loan used to buy a qualified vehicle. It phases out over $100,000 of modified adjusted gross income ($200,000 for joint filers). The IRS lists the conditions: the loan originated after Dec. 31, 2024; the vehicle is for personal, not business, use; it has a gross vehicle weight rating under 14,000 pounds; and it "underwent final assembly in the United States." Lease payments do not qualify.

Seniors: people 65 and older may claim an additional $6,000 deduction each, or $12,000 for a married couple if both qualify. It phases out over $75,000 of modified adjusted gross income ($150,000 for joint filers), and each person needs a valid Social Security number.

Did the Form 1099-K and 1099-NEC thresholds change?

Yes, both moved up. Payment apps and online marketplaces now report on Form 1099-K when payments to you "exceed $20,000 and there are more than 200 transactions," per the IRS Form 1099-K FAQs. The IRS adds: "All income, no matter the amount, is taxable unless the tax law says it isn't, even if you don't get a Form 1099-K."

For Forms 1099-NEC and 1099-MISC, the reporting amount is "$2,000 for payments made after December 31, 2025," up from $600, per the IRS Form 1099-NEC FAQ. The instructions say the amount may be adjusted for inflation beginning in calendar year 2027. If you pay contractors, plan your January filings with your bookkeeping.

Will the IRS still mail a paper refund check?

Generally not. The IRS "generally stopped issuing paper refund checks for individual taxpayers after Sept. 30, 2025," per its questions and answers on Executive Order 14247.

If your return has no bank information, it is still processed. The IRS sends Notice CP53E asking you to respond within 30 days.
With no response and no other issues, "the refund will be released as a paper check after six weeks."
The IRS will not ask for your banking details by phone or text.
Limited exceptions apply, for example for hardship.
For now, the IRS still accepts mailed payments, including checks and money orders.

Is IRS Direct File still available?

No. The Taxpayer Advocate Service's filing season resources page notes that the Direct File program "will end for the 2026 filing season." Other free routes remained: IRS Free File for an adjusted gross income of $89,000 or less in 2025, Free File Fillable Forms at any income, and free volunteer preparation for those who qualify, per IRS Tax Tip 2026-08.

One more 2026 change is on the penalty side. The IRS says its new Automatic Exemption from Penalty "begins summer 2026" for eligible 2025 returns, and taxpayers "do not need to take action." See penalty abatement for how it fits with First Time Abate.

What changed for your 2025 and 2026 taxes