The primary reason for the potential increase is the “One Big Beautiful Bill Act” (OBBBA), signed into law in July 2025. The legislation included several retroactive tax cuts for the 2025 tax year, like no tax on tips, no tax on overtime, and no tax on Social Security. The IRS did not update the tax withholding tables for employers immediately. This means many Americans had more money withheld from their paychecks throughout 2025 than they will ultimately owe, resulting in a larger lump-sum refund when they file. Paychecks in 2026 will be slightly larger since all employers should be using updated deduction tables.
