Just one month remains in the 2025 tax filing season before the April 15 deadline.
As of March 7, the Internal Revenue Service (IRS) has received fewer returns than in the same period in 2024, but the average refund is 5.7% higher, according to IRS data.
Despite larger checks going out, tax season can be especially stressful. One survey from Intuit Credit Karma and Qualtrics found that nearly a third of workers want to cry just thinking about filing their taxes.
To mitigate some of these worries (and tears), Yahoo Finance asked professional advisers about their top tips and reminders for the 2025 tax season.
As of March 1, the IRS processed 98.8% of the filings it received, refunding $124.8 billion to taxpayers.
“We’re seeing in our practice that more clients are actually getting refunds this year,” Gordon Tax Partner Andrew Gordon told Yahoo Finance.
Some Americans may be expecting larger checks this year due to recent life changes, Gordon said.
“One of the most significant credits or deductions is the child tax credit,” Gordon said. “And so if you had a kid during the year, you can get an additional $2,000 of credit for your taxes, and up to $1,700 of this is refundable or will be paid directly back to you.”
The tax code itself may be another reason for greater refunds.
“We saw that the standard deduction, which many people take instead of itemizing, in fact, increased this year to $14,600,” Gordon said. “And at the same time, the tax brackets themselves, the amount in each bracket increased with inflation. So if your income stayed exactly the same, you’ll still get a larger refund because there’s larger tax brackets.”
Still, there are reasons why you may not want a fat check from the IRS.
“If you’re getting a large refund, it’s not necessarily a good thing,” Gordon said. “I hear from people all the time, ‘Hey, I got a large refund,’ but the reality is that you’ve given the government an interest-free loan.”
TurboTax expert Lisa Greene-Lewis explained that if aren’t happy with your tax return this year, you can adjust your withholding. It may mean a smaller refund next year but more cash in your pocket every month.
According to a 2024 Bankrate survey, 36% of US adults earn extra income through a side hustle. And with the growth of unreported earnings on peer-to-peer payment platforms like Venmo and PayPal (PYPL), the IRS is looking for its cut.
“Many people, especially during COVID, created side hustles, created these businesses,” KDA CEOKarla Dennis told Yahoo Finance. “And [the IRS knows] that there’s a lot of unreported income going on. So IRS is looking to crack down, get all the income reported, and [make] sure they collect the appropriate amount of tax.”
Shannon Philbrick of Liberty Tax Services, dressed as the Statue of Liberty, waves a sign at drivers in Westminster, Colo., on Feb. 4, 2009. (Reuters/Rick Wilking) ·REUTERS / Reuters
This means filers who earned over $5,000 from payments on online platforms in 2024 will receive a 1099-K and be taxed on that income. The IRS’s reporting threshold decreases to $2,500
for the 2025 calendar year and $600 in 2026.
The new digital payment rules are noteworthy for budding creators and freelancers. However, there are some key ways freelancers can still maximize their tax returns.
“One of the things that [independent workers] should do before they file is realize all those personal expenses that they’re using for business transition over, and [they should] start actually taking it as a business deduction,” Dennis said. “Things like their car, their cell phone — things they’re paying out of pocket — their meals, their travel.”
“In addition to that, [freelancers] want to have a separate bank account for their business,” Dennis added. “Don’t commingle funds because when you commingle funds, [the] IRS can classify those expenses as personal, and you could lose those deductions.”
There are a few main causes of income taxes in retirement, but one of the biggest is required minimum distributions (RMDs).
“[It’s] a little confusing, but the thing about RMDs is that they’re taxable income,” Decoding Retirement host Bob Powell said. “And when you take it, it could bump you into a higher tax rate.”
Powell noted there are some steps you can take to avoid the adverse tax effects of RMDs.
“One is to start thinking about doing full or partial Roth conversions so that you reduce the RMDs when it comes time for you to take these distributions,” he said. “The other is to start drawing down before you reach RMD age, and that could reduce the RMDs when you get to RMD age.”
“And then the last thing you can do is, if you’re 70 1/2 and older, you can take something called qualified charitable distribution or QCDs, which are not taxable,” Powell added. “And those are one way you can at least avoid the adverse effects of RMDs.”
There are also lesser-known credits some retirees have access to.
“Retirement Savers credit, that’s a little-known credit,” Greene-Lewis told Yahoo Finance. “You get it just for investing in your retirement. And that’s up to $1,000 if you’re single and $2,000 married filing jointly.”
Retirees can also maximize tax advantages through their healthcare premiums.
According to Powell, most retirees enrolled in Medicare Part B pay a monthly charge of about $185. “But if you have what’s called a modified adjusted gross income that is above a certain threshold, you may pay anywhere from $259 per month to upward of $628 … per month, depending on your modified adjusted gross income, or ‘MAGI,’ as they like to say,” he said.
Powell advised retirees who fit into this category to be mindful of their modified adjusted gross income as well as their taxable income rate when doing Roth conversions, drawing down IRAs, taking a bonus or severance package, or selling assets.
“If you push yourself into a higher MAGI, you’re going to pay the surcharge,” he said.
