Top Federal Tax Policies Of 2026: Midyear Report Published July 7, 2026
Written by Asha Glover
Months ahead of the November midterm elections, the U.S. House and Senate have spent their time moving legislation that would make several tax administrative fixes at the Internal Revenue Service, as well as debating IRS funding and evaluating the success of the 2026 tax season.
Here, Law360 looks at the most consequential developments in federal tax policy from the first half of 2026.
Bipartisan IRS Changes
House of Representatives and Senate lawmakers have introduced proposals to make IRS administrative changes, with both garnering bipartisan support.
While the budget reconciliation process has been used by both parties in recent years to pass major tax policy changes along party lines, other legislation generally requires bipartisan support to get to the president’s desk, Mark Epley, a partner at Arnold & Porter Kaye Scholer LLP, told Law360.
“In the absence of reconciliation, the only way to do tax legislation — or anything for that matter — is through genuine, bona fide, bipartisan agreement, and, as it happens, those are sort of the most durable changes,” Epley said. “Improving tax administration is something around which the two parties have been able to find consensus.”
The House Ways and Means Committee has passed several bills that would make administrative changes at the IRS. The proposals, the Taxpayer Experience Improvement Act and the IRS Whistleblower Program Improvement Act, were both unanimously approved by a House panel in March and mirror those in the Senate’s Taxpayer Assistance and Service Act.
The Taxpayer Experience Improvement Act, or H.R. 7971, would establish a dashboard for timing updates and expand callback technology, online accounts and electronic access to information about returns and refunds.
The IRS Whistleblower Program Improvement Act, or H.R. 7959, proposes several changes to the agency’s whistleblower program, including specifying that the U.S. Tax Court ‘s judicial standard of whistleblower award determinations is de novo and that the scope of review is limited to the administrative record that informed the original award, according to a Joint Committee on Taxation summary.
It would also allow whistleblowers to proceed anonymously in any Tax Court review of a whistleblower award determination unless there is a societal interest in disclosing their identity that outweighs the potential harm the disclosure would cause, according to the bill summary.
The Ways and Means Committee passed another slate of tax administration bills Wednesday, including legislation that would postpone tax deadlines for hostages and allow the national taxpayer advocate to appear as amicus curiae in federal tax cases.
In the Senate, the Finance Committee’s top taxwriters, Chairman Mike Crapo, R-Idaho, and ranking member Ron Wyden, D-Ore., introduced the Taxpayer Assistance and Service Act in February. The bill includes several provisions that mimic those in the House’s Taxpayer Experience Improvement Act and the IRS Whistleblower Program Improvement Act.
The legislation, introduced by Crapo and Wyden in February, would make it easier for taxpayers to track refunds, review tax returns and respond to the IRS by upgrading online accounts and using the IRS’ Where’s My Refund and Where’s My Amended Return tools. The bill would also establish a dashboard to update taxpayers on backlogs and wait times, expand IRS callback options and increase the independence of the National Taxpayer Advocate and IRS Independent Office of Appeals, according to a Senate Finance Committee summary.
The bill would additionally strengthen standards for paid tax preparers, including by expanding the definition of a tax return in order to apply penalties to preparers who improperly alter returns after they have been signed, according to the bill’s summary.
The bipartisan proposal is still awaiting a Senate Finance Committee vote.
National Taxpayer Advocate Erin Collins said June 24 that the bills have virtually no opposition.
“The leadership and staffs of the tax-writing committees deserve tremendous credit for their efforts to improve the taxpayer experience, and I encourage Congress to finish the job by passing this tax administration legislation before the end of the year,” Collins said in her midyear report to Congress.
Post-Budget-Bill Tax Season
This year’s tax season marked the first since the passage of last year’s budget bill . It was largely successful, with the IRS processing almost 139 million individual tax returns and issuing more than 90 million refunds while implementing more than 100 tax law changes under the budget bill, Collins said in her midyear report.
House Republicans have spent the season’s aftermath touting the successes of the law’s new deductions for tips, overtime and auto loans.
Ways and Means Tax Subcommittee President Mike Kelly, R-Pa., said in May that taxpayers who claimed the overtime deduction received an average deduction of about $3,100 in the most recent filing season. Over 7 million Americans claimed the law’s new deduction for tips, receiving an average deduction of more than $7,000, according to Kelly.
The tips deduction is available for up to $25,000 of qualified tip income. The overtime deduction, available for up to $12,500 in overtime compensation for individuals, phases out for taxpayers with more than $150,000 in annual income, according to a fact sheet.
Dave Bohrman, co-founder and marketing vice president at Tax Guard, which works with the IRS to share tax data with lenders, told Law360 that the 2026 tax season went well, despite the IRS losing a quarter of its staff last year. In general, the agency did a solid job providing information on new and updated policies to tax professionals, he said.
“It was not a disaster — by all means, it was successful,” Bohrman said. “People answered the phone when they needed to … and people got their refunds.”
Though, he added, “it wasn’t without glitches.”
The agency also faced significant challenges due to implementation of the tax changes included in the budget bill, a smaller staff and leadership turnover, according to Collins’ report. Though the staff successfully pushed out forms and other publications under tight deadlines — while also establishing new administrative frameworks for Trump accounts, the new tax-advantaged brokerage accounts for children — the workforce reductions did affect customer service, according to the report.
Bohrman also pointed to issues where notices were mistakenly sent to taxpayers who did not owe money to alert them that they did. Taxpayers and stakeholders, including software providers for tax professionals, also had questions about the new deductions for tips, overtime and car loans.
“I’m not a tax preparer, so I don’t want to say that it wasn’t a hard tax season,” Bohrman said. “I’m saying it was a very intense and stressful tax season and I think a lot of things happened at the last minute — which is not ideal for any preparation — but essentially, we got to the finish line relatively unscathed with those new policies.”
IRS Funding
Lawmakers have also begun work on IRS funding legislation ahead of the start of the next fiscal year in September.
The House Appropriations Committee passed legislation in April that would cut the agency’s funding by $1 billion for 2027, sending it to the full House for consideration. The bill would fund the IRS at $10.2 billion, earmarking just over $3 billion for taxpayer services, $3.6 billion for enforcement and $3.6 billion for technology and operations support…
