Tips, Overtime, and Bigger Refunds: 7 Tax Moves New Haven Families and Self-Employed Filers Should Make Before December 31

New Haven, CT (September 19, 2026) Jose’s Tax Service

There are roughly three and a half months left to make legal changes that may reduce your 2026 tax bill or increase your refund. After December 31, 2026, many of these planning opportunities close.

The September 15 estimated-tax deadline has passed. For most calendar-year self-employed taxpayers, it was the third quarterly installment. The final regular installment generally falls on January 15, 2027. However, the September deadline is an important checkpoint. It gives you time to review income, withholding, deductions, and credits before year-end.

The Internal Revenue Service (IRS) has published its 2026 inflation adjustments. The standard deduction is now:

• $32,200 for married filing jointly.
• $16,100 for single filers and married filing separately.
• $24,150 for head-of-household filers.

The 2026 rules also include new deductions for qualified tips and overtime, a higher state and local tax (SALT) cap, expanded family benefits, and additional planning opportunities for eligible seniors.

Review the 2026 rules before you act!

For 2026, several changes may affect New Haven families and individual filers:

• The qualified tips deduction may reach $25,000 per return, subject to eligibility rules and income phase-outs.
• The qualified overtime deduction may reach $12,500 for single filers and $25,000 for joint filers.
• The federal SALT cap is now $40,000 through 2029, with phase-outs for higher-income taxpayers.
• The Child Tax Credit (CTC) is $2,200 per qualifying child, including a refundable portion of up to $1,700, subject to eligibility requirements.
• Non-itemizers may claim a charitable deduction of up to $1,000 for single filers or $2,000 for joint filers.
• Eligible taxpayers age 65 and older may qualify for an additional $6,000 deduction through 2028, subject to phase-outs.
• Connecticut taxpayers may qualify for a refundable child tax credit of up to $600 per child, limited to three children, depending on current state rules and eligibility.
• Connecticut’s Earned Income Tax Credit (EITC) is generally calculated at 40% of the federal EITC. Eligible taxpayers with qualifying children may also need to review the state’s additional child-related benefit.

Use the IRS 2026 inflation adjustment announcement and current Connecticut Department of Revenue Services information when confirming final eligibility.

1. Recalculate withholding and estimated payments!

Do not wait until April to discover that your income increased without a matching tax payment.

Review:

• Year-to-date wages and overtime.
• Tips reported on Form W-2, Form 1099, or Form 4137.
• 1099-NEC, 1099-MISC, and 1099-K income.
• Spouse income and withholding.
• Self-employment income and expenses.
• Tax credits and deductions expected for 2026.

Use Form 1040-ES, Estimated Tax for Individuals, to calculate remaining payments. The general safe-harbor rules require payment of at least:

1. 100% of your prior-year tax, or
2. 110% of your prior-year tax if your 2025 adjusted gross income (AGI) exceeded $150,000, or
3. 90% of your current-year tax liability.

Self-employed taxpayers with uneven or seasonal income may qualify to use the annualized income method on Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts. This method may match payment timing to the months when income was actually earned.

Reminder: Underpayment penalties and interest may compound. Calculate the shortfall now and correct it before the January 15 payment deadline.

2. Complete your family credit review!

Families should review every available credit before the year closes. Do not rely on last year’s return as a complete checklist.

Check the following items:

• Child Tax Credit: Confirm each child’s age, relationship, residency, and Social Security number.
• Credit for Other Dependents: Review dependents who do not qualify for the CTC.
• Connecticut child tax credit: Check current state eligibility and income phase-outs. This credit is often overlooked.
• Connecticut EITC: Compare your federal EITC eligibility with Connecticut’s rules.
• Child and Dependent Care Credit: Gather provider names, addresses, tax identification numbers, and payments.
• Educator expense deduction: Eligible educators should retain receipts for qualifying classroom materials.
• Charitable contributions: Non-itemizers should review the new $1,000 single or $2,000 joint deduction. Keep written acknowledgments for qualifying donations.

3. Use open enrollment to plan dependent care!

Open enrollment is a tax-planning deadline for working families. If your employer offers a Dependent Care Flexible Spending Account (DCFSA), review your 2027 election carefully.

For 2026, the dependent care FSA limit may reach $7,500 per household, or $3,750 for married filing separately, subject to plan administration and eligibility. Expenses paid through a dependent care FSA generally cannot also be used for the same dependent care credit.

Enter a realistic amount. Estimate daycare, after-school care, summer care, and qualifying elder care expenses. Do not elect more than you can reasonably use. Unused amounts may be subject to plan forfeiture rules.

Action: Ask your employer for the plan’s carryover and grace-period rules before completing open enrollment.

4. Capture every qualified tip and overtime deduction!

Tips and overtime remain taxable income. The new rules create potential deductions. They do not eliminate the need to report income accurately.

Gather:

• Form W-2 and year-end pay statements.
• Employer records showing qualified overtime.
• Tip reports and payroll summaries.
• Form 1099-NEC, Form 1099-MISC, or Form 1099-K, when applicable.
• Form 4137 if unreported tip income must be reported.

The qualified tips deduction may reach $25,000. The overtime deduction may reach $12,500 for single filers or $25,000 for joint filers. Income phase-outs and reporting requirements apply. These deductions are generally claimed through Schedule 1-A, Additional Deductions, and transferred to Form 1040.

Action: Save the documents that prove the amount, source, and classification of your tips and overtime. Unsupported amounts may be rejected.

5. Claim legitimate self-employed deductions!

Self-employed and 1099 filers should reconcile business records before December 31. Keep business and personal accounts separate. Use a dedicated account and payment method whenever possible.

Review these deductions:

• Qualified Business Income (QBI): The 20% QBI deduction may be available even when you claim the standard deduction. The commonly referenced phase-out thresholds are $197,300 for single filers and $394,600 for joint filers, subject to the applicable 2026 instructions and business type.
• Business mileage: The 2026 standard mileage rate is 72.5 cents per mile. Log the date, destination, business purpose, and miles driven.
• Home office: Compare the simplified method, which may be limited to $1,500, with the actual-expense method. The actual method may produce a larger deduction when qualifying costs are substantial.
• Ordinary business expenses: Review software, supplies, professional fees, advertising, phone expenses, and other costs that are ordinary and necessary.

No log, no deduction. No receipt, no reliable proof. Documentation is the deduction. The IRS generally allows what you can substantiate.

6. Fund retirement accounts before the deadline!

A Solo 401(k) may help eligible self-employed individuals reduce taxable income and build retirement savings.

For 2026 planning, the employee elective deferral limit is up to $23,500, with an additional catch-up contribution available for taxpayers age 50 and older, subject to the applicable plan rules.

The employee deferral generally must be elected by December 31, 2026. Contribution deadlines may differ depending on the business structure, plan document, and whether the contribution is treated as an employee or employer contribution.

Action: Contact the plan provider before year-end. Confirm that the plan exists, the election is completed, and the contribution method is documented.

7. Smooth income and expenses before year-end!

Cash-basis self-employed taxpayers may be able to manage taxable income by accelerating legitimate expenses into December.

Consider prepaying eligible 2027 business expenses in December 2026 when:

• The expense is ordinary and necessary.
• The payment is properly documented.
• The expense is not personal.
• The payment does not violate capitalization or prepaid-expense rules.
• The expense is connected to the business.

Do not create artificial expenses. Do not purchase items solely for a deduction. A deduction reduces taxable income; it does not make an unnecessary purchase profitable.

Also review receivables, year-end invoices, equipment purchases, and retirement contributions. A short consultation may identify a better timing strategy.

Two mistakes that cost real money!

Underpayment penalties and interest

A tax balance is not the only concern. Underpayment penalties and interest may apply when estimated payments are insufficient. Interest can compound until the balance is paid.

Review Form 1040-ES, Form 2210, and IRS Publication 505 before the final payment date.

Incomplete documentation

The IRS allows deductions and credits that can be supported. Keep:

• Receipts.
• Mileage logs.
• Bank and credit-card statements.
• Childcare provider information.
• Donation acknowledgments.
• Retirement plan records.
• Payroll and tip reports.
• Separate business and personal account records.

Organize these documents now. Reconstructing them after filing can delay processing and may lead to denied deductions, penalties, or additional tax.

Plan before December 31!

The 2026 IRS adjustments create new opportunities, but eligibility depends on income, filing status, documentation, and the exact facts of your return.

Jose’s Tax Service provides year-round tax planning for individuals, families, and self-employed clients in New Haven and virtually anywhere. Appointments are available in person or virtually, including same-day appointments when available. We offer personalized service, competitive rates, and $0 upfront payment.

Call or text 475-254-9373, or book at josestaxservice.com.

Category: Tax Planning | Tags: tax refund, personal finance, IRS tips, New Haven taxes