Here’s a priority for Republican lawmakers: Expanding school choice for K-12 education. Tax incentives are one way to meet this goal, and it’s a much easier path than using vouchers. States have been in the forefront on this. Nearly half have tax credit scholarship programs, which give taxpayers credits to offset state taxes for donating funds to participating organizations that endow scholarships to attend private school for primary and secondary education. In 2020, the Supreme Court ruled that these scholarships can be used for education at K-12 religious schools.
The federal government is now implementing a similar tax incentive. The new federal scholarship tax credit (FSTC) first takes effect in 2027, meaning on 2027 federal income tax returns filed in early 2028. This tax break, which was enacted by congressional GOPers in last summer’s “One Big Beautiful Bill,” is a nonrefundable federal tax credit of up to $1,700 for individuals who donate cash to qualifying organizations that are created to provide scholarships to K-12 students. The FSTC can offset both the regular income tax and alternative minimum tax. The $1,700 credit amount applies to taxpayers filing a single return or joint return, and there is no income limitation, meaning upper-income filers can take the credit. Credits in excess of tax liability can be carried forward to offset tax for five years. Additionally, scholarship recipients won’t be taxed on the funds that they receive.
Payroll Taxes: The Social Security wage base cap is expected to be $190,200 for 2027, up $5,700 from this year’s cap, according to Social Security Admin. trustees. The final number, based on national average-wage-index growth, comes in mid-Oct.
Amended Returns: Here are some tips for amending an individual tax return that you filed: You generally have three years from the due date of your original Form 1040 or 1040-SR to amend it by filing an amended individual tax return on Form 1040-X. You can e-file Form 1040-X using a tax software product or file on paper. If you filed your original 1040 on paper, you will have to mail a paper 1040-X to IRS. Only e-filers can request direct deposit of refunds into their bank accounts. If you are mailing in a paper 1040-X, IRS will send your refund as a paper check. This is an exception to IRS’s general rule of not paying out refunds by paper checks. Use IRS’s “Where’s My Amended Return” to check the status of a filed 1040-X. If you’re amending your 1040, you may also need to amend your state return. Have lots of patience once you’ve filed your amended tax return with IRS. IRS says it is currently processing paper amended returns received in April 2026. Maybe the processing speed will pick up. Frank Bisignano, IRS’s CEO, testified before Congress that IRS is using artificial intelligence to reduce processing times of amended returns to as little as three days. We’ll see how this plays out over time.
Preparers: Despite tax pro objections, IRS is combining its two tax professional offices. IRS’s Office of Professional Responsibility (OPR) enforces Circular 230 rules… the procedures that regulate tax professionals who practice before the agency. OPR investigates referrals of alleged misconduct, institutes disciplinary actions, etc. IRS’s Return Preparer Office (RPO) oversees preparer tax identification numbers, manages the enrolled agent program, encourages unenrolled preparers to opt in to the agency’s Annual Filing Season Program and processes some complaints. The Service will launch the new Tax Professional Management Office on June 28 to combine OPR and RPO. Tax professional groups aren’t happy with this change.
IRS: Notwithstanding IRS’s push for e-filing and its zero-paper initiative… The agency estimates it receives about 90 million pieces of mail each year. This includes tax returns, information returns, correspondence and nontax forms, and paper checks. IRS is slowly turning to digital processing, with the emphasis on slowly. Treasury inspectors say that as of May 2025, IRS digitally processed 5% of paper-filed 940 and 941 forms in the 2025 filing season. IRS hired four contractors to scan paper forms and correspondence. Perhaps this will speed up the process.
IRS’s workforce shrank by 28% in one year, from 103,000 on Jan. 1, 2025, to 74,000 in Jan. 2026, after many workers opted for voluntary deferred resignation. The agency’s enforcement arm took a big hit, losing 33% of its revenue agents and 32% of its tax examiners during 2025. We expect there will be additional cuts. It’s surely why there are fewer exams…less than 500,000 in fiscal year 2025. It’s also likely why the agency relies on other means to question taxpayers. IRS’s exam figures don’t count computer-generated CP2000 notices about mismatches between income and deductions on income tax returns and data on information returns. Also not included are math-error corrections and other notices that may require filers to send in documents or other information to the agency and may feel like an audit. With these measures factored in, IRS’s coverage rate jumped to 3.5 million returns.