That collective exhale you heard this week?
It was the sound of tens of millions of taxpayers and tax professionals finally taking a breath after an unpredictable (and sometimes chaotic) tax season.
The IRS expected to receive 164 million tax returns by April 15, and we don’t yet know whether we met that number. If we did, it would mean a flurry of returns was filed in the last five days of the tax season. As of April 10, the agency has received about 114.3 million returns so far, down 2.8% from the same point in 2025, with processing numbers tracking slightly lower as well.
(If you still haven’t filed yet, don’t forget to sign your return properly—even if you e-file—and make sure that any mailed returns and payments are postmarked.)
The story throughout the season has focused on refunds. The IRS has issued more than 78 million refunds totaling $265.2 billion, pushing the average refund up to $3,397—an increase of over 11% from last year.
But, significantly, the increase wasn’t as significant as many in Congress and the White House had hoped. In January, the White House declared that the One Big Beautiful Bill Act (OBBBA) would deliver “the biggest tax refund season ever, with average refunds projected to rise by $1,000 or more this year due to its transformative policies.” As of April 10, the average refund had risen by just $342.
Importantly, much of the current bump is tied to tax law changes that boosted deductions and credits without corresponding updates to withholding tables, but those numbers likely won’t look the same in 2027. To be clear, the tax savings aren’t going anywhere—but you’ll see those extra dollars in your paycheck as you go instead of a big check next year. In dollars, a $342 increase means those taxpayers would see an average of $6.58 more in their weekly paychecks.
Of course, those folks who are writing checks rather than cashing them are likely less enthusiastic about tax season and the IRS. In this week’s episode of History Is Taxing, Robert Goulder and Joseph Thorndike of Tax Notes explore tax collection throughout U.S. history, from tariffs to tax returns, and how the past has shaped Americans’ perception of tax.
The consensus? Nobody likes a tax collector. It’s a truth that has echoed across centuries of American history and still shapes how taxpayers view the IRS today. While people may resent paying taxes and the scrutiny that comes with enforcement, they are equally frustrated by the idea that others might not be paying their fair share. That push and pull has defined the evolution of the nation’s tax system. Over time, the consensus seems to be that the IRS has been shaped as much by public skepticism and political pressure as by economics and the need to fund federal programs.
The modern income tax system has been in place for more than 100 years. The shift towards an income tax—instead of a series of excise taxes — didn’t just reshape how the government raises revenue; it also helped set the stage for one of the most dramatic shifts in American drinking culture. After the 16th Amendment reduced reliance on alcohol excise taxes, Congress moved forward with Prohibition (known as the 18th Amendment), which banned the manufacture and sale of alcohol and unintentionally pushed drinking underground into speakeasies and bootlegging networks. The result was a surge in improvised, often low-quality liquor that demanded creativity to make it palatable.
The result? What many consider to be the golden age of cocktail experimentation. Bartenders and home mixers leaned on citrus, sugar, and other ingredients to mask the watered-down, bootlegged booze and harsh flavors found in homemade alternatives (like your bathtub gin). Many classic drinks, including the Bee’s Knees and the Sidecar, either originated or became super popular during this period. While the shift in tax and government policy only lasted a decade or so (it turns out that we liked excise taxes and alcohol), it also left a lasting influence on how Americans drink today.
If you’re in the mood to toast the end of tax season, you’ll find some of those recipes (including a non-alcoholic alternative) here.
Cheers, and enjoy your weekend! 🥂
Kelly Phillips Erb (Senior Writer, Tax)
This is a published version of the Tax Breaks newsletter, you can sign up to get Tax Breaks in your inbox here.
Questions
This week, a reader asks:
I owe back taxes for 2023, 2024, and now I owe more for 2025. I want to send in a payment, but I can’t pay it all. Can I pick which year to send my payment for?
Yes. To make sure your payment lands in the right tax year, you want to clearly designate the payment when you make it.
If you’re paying by check, that’s easy. Include a voucher (you can download Form 1040-V from irs.gov), and write the following on the check: your name (as shown on your tax return), your SSN, the tax form (usually Form 1040), and the tax year (for example, “2025 Form 1040”).
If you’re paying electronically using IRS Direct Pay or EFTPS, you’ll be asked to select: the tax form (Form 1040), the type of payment (in your case, balance due), and the tax year you’re paying for. As long as those fields are correct, the payment should be applied exactly where you intend.
You’ll want to get it right because each tax year has its own balance due, penalties and interest, and, importantly, a statute of limitations for collections (the clock runs separately for each tax year). If you send a payment to the wrong year, you could still owe for the year you intended to pay down and overpay another year (if you owe for another year, the IRS will not send you a refund for an overpayment).
Statistics, Charts, and Graphs
Congressman Brendan Boyle’s (D-PA) proposal to suspend the federal gas tax when prices top $4 per gallon is designed to offer immediate relief at the pump, but it only tackles part of the equation. Even if enacted, the federal tax would account for a relatively small share of what drivers pay compared to state taxes, which are often significantly higher and already embedded in the per-gallon price.
State gas taxes vary dramatically, from more than 70 cents per gallon in California to under 10 cents in Alaska, and they don’t always appear as a separate line item for consumers. As prices rise, some states are experimenting with temporary tax holidays or partial suspensions, while others are holding back due to concerns about budget gaps or limited consumer impact (since top-down rollbacks don’t always trickle down to taxpayers).
For context, the federal gas tax currently sits at 18.4 cents per gallon, a rate that hasn’t budged since 1993. It traces its roots back to 1932, when it was introduced as a one-cent levy to help plug budget holes during the Great Depression, before evolving into a primary funding source for highways, making up the Highway Trust Fund. Over time, it has been tweaked and repurposed, but unlike many state taxes, the rate hasn’t changed for decades.
(And when it comes to cars, it’s not just gas taxes that states depend on for revenue—they also rely on sales taxes. A popular workaround known as the “Montana Loophole” has long allowed buyers of high-end vehicles to sidestep state sales taxes by titling cars through Montana LLCs, where no sales tax applies. But as the tactic spreads, states are increasingly cracking down, with audits, new legislation, and even criminal charges signaling that what once flew under the radar is now firmly in the crosshairs.)
Taxes From A To Z: O is for Original Issue Discount (OID)
Original Issue Discount (OID) is interest that accrues over time on a debt instrument (like a bond) issued for less than its face value. Instead of receiving periodic interest payments, you earn the difference between the purchase price and the amount paid at maturity. For tax purposes, the IRS treats that increase in value as interest income, even if you don’t actually have cash in your pocket.
Here’s an example. Let’s say you buy a bond for $900 with a face value of $1,000. That $100 gap? That’s OID. Instead of getting regular interest payments, you’re earning interest gradually as the bond creeps up to its full value.
When this happens, you report a portion of the OID as income annually, typically using the amounts shown on Form 1099-OID. As the income is recognized each year, your basis in the bond increases, which prevents double taxation when you eventually redeem the bond.
OID is a real tax term, but scammers have manipulated taxpayers into believing false claims that you can file a Form 1099-OID to report large amounts of “interest income” and “tax withholding” tied to mortgages, credit cards, or personal debts, and then claim a big refund. Scammers might say your loan is a “bond” or that banks have secret accounts in your name that you can tap into through OID reporting. None of that is grounded in tax law. It’s a misuse of the form.
A good rule of thumb: you should only receive a 1099-OID from a legitimate issuer of a debt instrument you actually invested in.
Tax Trivia
Which state was the nation’s first to impose a per-gallon tax on gasoline?
(A) California
(B) New Jersey
(C) Oregon
(D) Texas
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS has granted penalty relief to qualifying farmers and fishermen who underpaid their 2025 estimated taxes, citing filing challenges stemming from late updates to Form 8995. Under Notice 2026-24, eligible taxpayers can avoid the usual addition to tax by filing their 2025 return and paying in full by April 15, 2026. The waiver applies automatically in most cases. The relief reflects the agency’s acknowledgment that software delays and corrected instructions disrupted timely filing.
Noteworthy
The IRS has rolled out a new “Whistleblower Alert” to flag concerns about the misuse or diversion of federal funds by tax-exempt organizations, businesses, and individuals, and to encourage insiders to come forward. The agency says the alerts are part of a broader push to surface high-risk noncompliance, with whistleblowers eligible for awards of up to 30% of the proceeds collected if their information leads to an enforcement action. Tips must be specific and submitted through Form 211, and the IRS signaled that additional alerts targeting other risk areas are on the way.
Washington state is dialing back a key tax break for data centers, narrowing a long-standing sales tax exemption that helped reduce the cost of upgrading equipment in existing facilities. The change leaves incentives in place for new projects but raises refurbishment costs, potentially influencing how and where companies expand their AI infrastructure.
Key Figures
That’s the federal excise tax on certain outbound remittances.
The new tax targets cash and cash-equivalent transfers sent from within the country beginning in 2026. Enacted under the OBBBA, the tax focuses on the method of payment rather than the identity of the sender, meaning anyone physically in the U.S., including tourists or digital nomads, can trigger the tax if they fund a transfer with cash, money orders, cashier’s checks, or similar instruments. Transfers funded through bank accounts, debit or credit cards, or other traceable channels are generally exempt.
The IRS’s proposed regulations would require remittance providers to withhold and remit the tax quarterly while relying heavily on customer self-certification to determine whether a transfer is taxable. Although the Treasury has suggested that most users can avoid the tax by shifting to card-based payments, practical barriers such as transaction limits, fees, and privacy concerns may keep many senders in cash-based systems, potentially broadening the tax’s real-world reach. At the same time, the structure leaves open alternative pathways, including transfers funded through foreign bank accounts or even certain cryptocurrency transactions, raising questions about compliance and enforcement, and about whether the tax may unintentionally accelerate the adoption of less traditional payment methods.
Another proposal would focus on the opposite: who you are. U.S. regulators are signaling a potential shift in bank compliance rules that could require financial institutions to verify not just a customer’s identity, but also their citizenship or nationality. While no formal rule is in place yet, the proposal raises practical challenges, including how banks would document citizenship for millions of Americans without passports and how it could complicate onboarding for dual nationals or those with complex status.
Trivia Answer
The answer is (C) Oregon.
Oregon passed the nation’s first per-gallon tax on gasoline in February 1919. The first gasoline tax was one cent per gallon. The revenue was used for early road building projects, including the Pacific Highway and the Columbia River Highway.
California, New Jersey and Texas all introduced a statewide gas tax in or around 1923.
Worth A Second Look
The links, clips, and tax takes readers loved (and a few you may have missed):
You can find last week’s newsletter here.
Tax Filing Deadlines
📅 May 15, 2026. Deadline for calendar year tax-exempt organizations to file annual reports and returns, including Forms 990, 990-EZ, and 990-PF.
📅 June 15, 2026. Due date for your 2026 Q2 estimated tax payment.
📅 June 15, 2026. Last day for U.S. taxpayers living abroad to file without a further extension (payment was still due April 15).
Tax Conferences And Events
📅 May 5-6, 2026. National Association of Enrolled Agents Capitol Hill Fly-In. Washington, DC.
📅 May 7-9, 2026. American Bar Association Section of Taxation May Tax Meeting. Marriott Marquis, Washington, DC.
📅 June 2-5, 2026. National Association of Black Accountants Insight 2026: WIN (We Invest Now) Convention & Expo, Aria, Las Vegas, Nevada.
📅 June 3-6, 2026. Tax Retreat—The Anticonference. San Antonio, Texas.
📅 June 8-11, 2026. AICPA Engage. ARIA Resort & Casino, Las Vegas & live online.
Feedback
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