IRS Reports Strong Filing Season Results and Increased Use of New Tax Deductions
The IRS reports that average tax refunds for the current filing season are 11.1% higher than last year, based on the agency’s latest statistics. Treasury Secretary Scott Bessent has attributed this increase in part to provisions included in the One Big Beautiful Bill Act (OBBBA), particularly the temporary deductions for overtime and tips.
As of March 27, the IRS had issued nearly 63 million refunds totaling approximately $221.7 billion. This represents a 13.6% increase in total refunds compared to the prior year, with the average refund reaching $3,521 per taxpayer. The IRS has also made notable progress in its digital initiatives. Refunds issued via direct deposit increased by 7.3%, while usage of IRS online platforms, including irs.gov, rose by 57% year over year.
According to Bessent, the new deductions introduced under OBBBA, available for tax years 2025 through 2028, have seen significant uptake. More than 4.6 million taxpayers have claimed the “No Tax on Tips” deduction, while over 25% of tax returns include a benefit from the overtime deduction. Nearly 20 million taxpayers are estimated to have benefited from the overtime provision alone.
Trump Account Signups Reach 4 Million, Private Partners Announced
The IRS reports that more than 4 million children have been enrolled in “Trump accounts” as of March 31, a new tax-advantaged investment vehicle established under the One Big Beautiful Bill Act (OBBBA). While this represents a notable early adoption, it remains a relatively small share of the approximately 70.4 million children in the United States. Treasury officials have emphasized the program’s broader goal of expanding ownership and encouraging long-term investing among younger generations, noting that account enrollment is integrated with the annual tax filing process to simplify participation.
Trump accounts, created under new Internal Revenue Code §530A, function similarly to IRAs for minors. Earnings grow tax-deferred, and distributions generally are not permitted until the account holder reaches age 18. Eligible U.S. citizen children born between 2025 and 2028 may receive a one-time $1,000 pilot contribution from the federal government, with additional contributions permitted from families, employers, and other approved sources beginning July 4, 2026. Enrollment is completed through IRS Form 4547, either as part of a tax return or via an online submission portal.
The Treasury Department has also announced private-sector partnerships to support program implementation, including Bank of New York Mellon for account administration and Robinhood as an initial brokerage and trustee provider. IRS leadership has indicated that the election process is designed to be straightforward, allowing taxpayers to enroll eligible children by completing a simplified form during tax filing.
IRS Expands Business Tax Account Access to Additional Entities
The IRS has announced a significant expansion of its Business Tax Account, extending access to partnerships, federal and state/local government entities, tribal governments, and tax-exempt organizations. These groups now join sole proprietors, S corporations, and C corporations, which previously had access to the platform.
According to the IRS, this expansion is part of its ongoing efforts to enhance taxpayer services by increasing digital access for a broader range of businesses and organizations, while reducing reliance on paper filings and phone-based support. The Business Tax Account is a secure, centralized online platform that enables eligible users to manage their federal tax obligations efficiently. Authorized users can view account balances, make payments, review payment history, access select digital notices, obtain certain transcripts (including payroll and income), and verify the business name and address on file with the IRS.
Direct Indexing: A Tax-Aware Alternative to Traditional Index Funds
Index mutual funds and ETFs remain popular, low-cost tools for building diversified portfolios, but they offer limited flexibility when it comes to tax management. Specifically, investors in pooled funds cannot selectively realize losses within the fund to offset capital gains. Direct indexing addresses this limitation by allowing investors to own the individual securities within an index, rather than the fund itself. This structure enables portfolio managers to selectively sell underperforming holdings and harvest losses, even in years when the broader market performs well, helping to reduce overall tax exposure.
Tax-loss harvesting through direct indexing can offset capital gains and up to $3,000 of ordinary income annually, with excess losses carried forward to future years. This strategy may be particularly beneficial for high-income individuals, investors with significant realized gains, or those seeking more control over portfolio composition, including the ability to exclude specific stocks or sectors. However, these benefits come with trade-offs, including higher fees, larger minimum investment requirements, and potentially diminishing tax advantages over time as portfolios appreciate. For investors who can accommodate the added complexity and cost, direct indexing may offer a more customized, tax-efficient approach to long-term investing.
Crypto Users Want to Comply, but Knowledge Gaps Persist, Survey Finds
A recent survey by Coinbase and CoinTracker highlights that while most U.S. cryptocurrency users intend to comply with tax obligations, many lack a clear understanding of key reporting requirements. Although 74% of respondents recognize that crypto transactions may be taxable and 65% have previously reported such activity, confusion remains with what constitutes a taxable event. Fewer than half correctly identified that selling digital assets triggers taxation, and many mistakenly believe that transfers between wallets or accounts are taxable. The 2025 tax year also introduced Form 1099-DA, requiring brokers to report gross proceeds from digital asset sales, but not cost basis, adding further complexity—particularly for assets transferred between platforms or involving transactions not captured on the form.
Brokers will be required to report cost basis for certain “covered” assets, though taxpayers will still need to reconcile discrepancies using their own records. Given ongoing gaps in reporting and understanding, taxpayers are advised to maintain detailed transaction histories and not rely solely on broker-provided information. The report also notes that relatively few users currently utilize specialized crypto tax software, despite its usefulness in tracking and reconciling transactions.
