An IRS Rule Change Could Lower Tax Bills for Up to One Million Filers

With just days to go before the 2026 tax season opens, a quiet administrative shift within the Internal Revenue Service could have significant effects on household finances. New operational changes at the IRS and tax relief measures passed into law last summer mean that as many as one million filers may see lower tax bills this year.

The changes arrive at a delicate moment. Millions of Americans are preparing to file their taxes, while the IRS is still adapting to major tax laws enacted last summer. For taxpayers, the headline promises are straightforward: less tax, better service, and fewer surprises.

What Has Changed

An update from the IRS has been issued, detailing how the agency's chief executive officer, Frank Bisignano, has reorganised senior management to focus more on improving tax compliance and customer service.

The revised tax framework includes expanded relief for overtime and tips, along with new deductions for qualifying older Americans, as part of legislation passed last summer. These measures may enable some individuals and families to reduce their taxable income sufficiently to meet, or even fall below, their tax obligations to the IRS — potentially saving them hundreds or even thousands of dollars.

Treasury officials anticipate that many taxpayers will see a lower tax liability than initially expected as these legislative changes are implemented during the 2026 filing season.

Who Could Benefit

While relief is not universal, many individuals stand to benefit, depending on their occupation. Those who receive tips or overtime pay will benefit most from this programme, as will eligible elderly taxpayers on fixed or low incomes.

The actual savings might seem modest on paper for many, but even small reductions in taxes can be significant amid the current soaring prices consumers face. The average tax refund last year was a little over $3,100. The government estimates that taxpayers will receive increased refunds again in 2026, allowing families to plan ahead for potentially larger refunds.

Pressure Behind the Scenes

However, taxpayers may face difficulties with these changes. The IRS has experienced considerable strain, now operating with a workforce reduced by roughly 26% following a wave of layoffs over the past year. Additionally, the agency is responsible for processing approximately 164 million individual income tax returns.

The National Taxpayer Advocate has expressed concerns that the combination of a smaller staff and the implementation of new, more complex laws could cause problems during this tax season. Potential issues include longer processing times, mistakes, and delays — topics that are currently dominating discussions around the IRS.

According to Bisignano, the new organisational structure within the IRS aims to provide greater stability. His priorities include delivering faster taxpayer service, more aggressive collection of outstanding revenues, and enhanced data protection for taxpayers.

Trust and Scrutiny

The recent shake-up has also attracted attention because of high-profile appointments linked to past whistleblowing cases. Supporters view these moves as signs of a tougher stance on enforcement and internal accountability. Critics, however, argue they risk distracting from the core mission of helping taxpayers file accurately and on time.

For most filers, though, politics will matter less than the outcome: a smoother filing process, clearer rules, and ideally, a smaller tax bill.