With Tax Day fast approaching on April 15, 2026, millions of Americans are gearing up to file their annual returns—some racing against the clock, others carefully gathering documents and seeking new ways to maximize their refunds. This year, however, brings a notable twist: a brand-new federal deduction for overtime pay, alongside a host of changes and reminders that could make or break your tax season, especially for hourly workers and those relying on free tax clinics.
According to reporting from the Cato Institute and KQED, the 2026 federal tax filing season introduces a significant benefit for many wage earners: the ability to deduct a portion of their overtime pay, thanks to the “One, Big, Beautiful Bill Act.” Under this new provision, individual taxpayers may deduct up to $12,500 per year of qualifying overtime premiums, while married couples filing jointly can deduct up to $25,000. The catch? Only the premium portion of overtime pay is deductible. For example, if your standard hourly wage is $20 and your overtime rate is $30, only the extra $10 per overtime hour—the premium—qualifies for the deduction. The base wage remains subject to regular taxation.
This change is part of a broader push to ease the federal income tax burden on work-related earnings, including tips and overtime, while simplifying the tax code for everyday workers. But as with most new tax rules, the devil is in the details—and confusion is running high.
“It is not something that’s automatic. It is not something that’s standardized for 2025, and it is something that you’d be prudent to keep your records, talk to your tax pro about it and let them do it correctly on your tax return,” said Mark Steber, chief tax information officer at Jackson Hewitt Tax Service, in comments to the Cato Institute. Steber emphasized that many people remain unaware of the new deduction, adding, “I find it’s amazing how many people do not even know this is a new deduction or a benefit or the tip one or even the senior deduction. So, there’s a lot of, you know, confusion on this because it’s so new and it’s so complicated and it’s never been done before.”
Documentation is another hurdle. Most W-2 forms don’t break out overtime premiums as a separate line, leaving taxpayers guessing about the correct amount to deduct. To bridge this gap, the IRS has granted “transitional relief” for the 2026 filing season, allowing filers to use year-end pay stubs, employer payroll summaries, or other records to calculate their deductible overtime premiums. This temporary flexibility is designed to help workers claim the benefit now, even as employers update their payroll systems.
Tax professionals across the country are urging workers to take advantage of this new deduction, but with a healthy dose of caution. As Steber put it, “The rules are so new, it’s important to consult a tax professional to make sure you get what you’re owed.”
Beyond overtime, tax season in 2026 comes with its usual array of stressors and opportunities—especially for those seeking free help. In the Bay Area and beyond, dozens of nonprofit organizations and Volunteer Income Tax Assistance (VITA) sites are offering free tax filing services, both in person and virtually, right up until April 15. Many of these sites provide help in multiple languages, including Spanish, Cantonese, Tagalog, and Vietnamese, making tax prep more accessible than ever. Some even offer unscheduled walk-in appointments, perfect for last-minute filers.
KQED reached out to community tax sites to gather their best advice for clients. Their number one tip? Get organized early. The last two weeks before Tax Day are always the busiest, with clinics seeing hundreds of people each week. To speed up the process, filers are encouraged to assemble a “filing kit” a few days before their appointment. This kit should include:
- Photo ID
- Social Security card or a letter from the Social Security Administration (or, if you lack a Social Security number, your Individual Taxpayer Identification Number, or ITIN)
- Social Security numbers or ITINs for everyone you’ll claim
- Income statement forms such as W-2, 1099-MISC, 1099-NEC, or 1099-K
- Proof of health care coverage (1095-B or 1095-A forms)
There are a few new wrinkles this year. Starting in 2026, taxpayers who received over $20,000 in more than 200 transactions through online payment systems like Venmo, Cash App, or PayPal will receive a 1099-K form. But even if you made less, the IRS still requires you to report all income, regardless of the amount. If you didn’t receive a 1099-K but exceeded the threshold, let your tax preparer know to avoid a potential audit.
For those who received unemployment benefits in 2025, a 1099-G form from the EDD is necessary. And if you’re insured through Covered California, you’ll need a 1095-A form; otherwise, a 1095-B will suffice. If you haven’t received these forms, contact your healthcare provider or check your online account before your appointment.
Another major development: as of February 5, 2026, a federal judge has temporarily blocked the IRS from sharing ITIN filers’ personal information with the Department of Homeland Security for immigration enforcement. While the courts haven’t reached a final decision, for now, the IRS cannot share personal data like addresses with agencies such as ICE, offering some peace of mind to immigrant taxpayers.
Eligibility for credits can be another stumbling block. Many filers assume they qualify for the federal Earned Income Tax Credit (EITC), but this rebate depends on income and the number of dependents. For example, a couple filing jointly with one child must have earned less than $57,554 in 2025. Single filers with no dependents must have made under $19,104. California’s own version of the EITC is capped at $32,900 for families. Without proof of health insurance, Californians may also face a state penalty—something tax preparers can help estimate.
Failing to file taxes isn’t just risky; it’s costly. Minnie Sage, program director of San Francisco-based Tax-Aid, told KQED, “It’s never a good idea to not pay your taxes. It’s going to cost you in the long run.” The IRS currently charges 7% interest on unpaid taxes, plus additional monthly penalties for failing to file or pay on time. As Sage warned, “Regardless to how much you owe, that’s going to add up.”
If you’re worried about paying your full tax bill upfront, don’t panic. The IRS allows payment plans, which can be set up when you file or later via their website. And if you’re owed a refund or eligible for credits from prior years, remember: you have only three years from the tax year to claim these funds before they become property of the federal government.
Despite ongoing reports of IRS staffing shortages, tax professionals report that refunds are running about 10% higher than last year, thanks in part to new deductions and credits. Processing delays haven’t been widespread so far, but with the deadline looming, the message is clear: gather your documents, understand the new rules, and don’t hesitate to seek help—whether from a professional or a free clinic. After all, tax season waits for no one, and this year’s changes could mean more money in your pocket—if you play your cards right.