If you’re expecting a refund from the IRS, you shouldn’t have to wait too long for your money. According to the IRS, it issues most refunds within three weeks of receiving your filing. Key to receiving your refund quickly are two actions on your part: using e-file and providing your bank info for direct deposit.
In fact, a directly deposited refund can show up in less than 21 days.
This table shows the estimated times for receiving an IRS tax refund depending on how you file and choose to get your refund:
• Most tax refunds are issued within three weeks of receiving the tax filing.
• E-filing and direct deposit can expedite the refund process, often under 21 days.
• Incomplete or incorrect tax returns can delay processing up to four months.
• Refunds may be held for manual review due to suspected fraud or discrepancies.
• Use the “Where’s My Refund?” tool or call 800-829-1954 to check refund status.
What Money Will Be Included in My Tax Refund This Year?
Of course, the size of your refund depends on how much you overpaid. But as of October 2025, the average refund for individuals was $3,052. That figure is up from 2024, when the average tax refund was $2,850.
To get your refund faster, you may want to file earlier, rather than waiting until the last minute. Typically, the tax season, when the IRS starts accepting and processing returns, starts in late January.
When your refund does arrive, an online budget planner can help you keep track of where your money is going.
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Reasons for Your Tax Refund to be Delayed
People typically receive their tax refund two weeks after the IRS accepts their tax filing if they opt to receive a direct deposit, or in three weeks if they choose to get a check in the mail. But if you’re still waiting after that point and wondering where your tax refund is, here are a few possible reasons for the delay:
• If anything in your return is incomplete or incorrect, the IRS may need to give the return further review before sending you a refund check. In this case, you may get a notice from the IRS in the mail with instructions for fixing or completing your tax return. It may take up to four months for the IRS to process returns that require extra handling. The sooner you respond to the IRS request for information, the sooner your return will be processed.
• If you are claiming the Earned Income Tax Credit or Additional Child Tax Credit, there may be a delay in receiving your tax refund. The IRS is required to hold any tax returns for people claiming those two tax credits until mid-February. This hold will show up in the “Where’s My Refund?” tool on the IRS site if it applies to you.
• Your bank or credit union may take more time to post a refund to your account. The time for posting IRS refunds varies from institution to institution.
How to Use the ‘Where’s My Refund?’ Tool on the IRS Site
The IRS has a “Where’s My Refund?” tool on irs.gov where anyone can check and see the status of their tax refund. It can also be accessed using the IRS2Go mobile app. If you submit your tax return electronically, you can easily check on the status of your refund online within 24 hours of filing. If you mail your tax return, it will take about a month or longer for any information about refunds to show up on the IRS site.
In order to access your refund information on the IRS website, you will need to input your Social Security number, tax filing status, and the dollar amount that you expect to receive on the return. Double check your information before submitting it: If the wrong Social Security number is entered, this could result in an error, extra identity verification steps, and even a delay in receiving your tax refund.
What Do the IRS Tax Return Statuses Mean?
There are three different IRS tax return statuses that you will see when you use the “Where’s My Refund?” tool. Here’s what they mean:
Received
Once the IRS has received a return, it is marked as received. You can check to see if your return has been received using the “Where’s My Refund?” tool on the IRS site.
Approved
Once the IRS processes a tax return and there are no errors or missing information, it is marked as approved. At that point, the process of sending a refund by mail or direct deposit can begin.
Sent
When the IRS mails out a refund check or sends a direct deposit refund, the tax return status is marked as “sent.”
How to Contact the IRS About Your Tax Refund
It’s best to wait at least 21 days after filing your return electronically, and six weeks after mailing your return, to contact the IRS by phone. At that point, you can call the IRS refund hotline at 800-829-1954.
Knowing when you’ll receive your tax refund can be helpful if you’re planning to use the money to pay off debt, create a budget, or save for a big purchase. Filing your return electronically and opting to get your refund via direct deposit will allow you to get your return quickly, typically within three weeks. A money tracker app can help you manage your finances, including your refund, and track your spending and savings.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
SoFi helps you stay on top of your finances.
FAQ
How quickly will I get my refund?
Most refunds are sent within three weeks of the IRS receiving a tax filing, but it can sometimes take longer, especially if you mail your return or opt to get your refund by check through the mail.
It’s been longer than 21 days since the IRS received my return and I haven’t gotten my refund. Why?
Sometimes the IRS needs to manually review tax returns if they are incomplete, have errors, or if fraud is suspected. Also, if a taxpayer claims certain tax credits, such as the Earned Income Credit or Additional Child Tax Credit, his or her return may take longer to process.
Will calling help me get my refund any faster?
Calling may help you track where your refund is, but it won’t necessarily help you get it faster. Wait at least 21 days after filing your return electronically, and six weeks after mailing your return to contact the IRS by phone. You can call the IRS refund hotline at 800-829-1954.
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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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An individual preparing to file a federal tax return will want to think back on gifts given in the prior year. If a gift exceeds a certain threshold, the IRS wants it reported by Tax Day — but only extremely wealthy taxpayers will ever have to pay taxes on their lifetime of gifts.
In 2025, you could have made gifts worth up to $19,000 per recipient without reducing your lifetime exemption, being required to report the gift to the IRS, or paying federal gift tax.
Gifts over that value count toward the lifetime gift and estate tax exemption of $13.99 million (per spouse, if married), rising even higher in 2026.
• Annual exclusion limits for gift tax are $19,000 for 2025 and 2026.
• The donor is typically responsible for filing and paying gift tax, if applicable.
• Failure to file a gift tax return can result in penalties and interest.
• Records of gifts must be kept indefinitely for tax purposes.
• Lifetime exemption for gift tax is $13.99 million per individual in 2025 and $15 million per individual in 2026.
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What Is a Gift and What Is Not?
According to the IRS, gift tax is applicable when property is transferred from one person to another, with the giver receiving nothing, or less than full value, in return. The tax applies even when the donor doesn’t consider the transfer a gift.
The IRS defines the federal gift tax broadly, including when the gift is monetary or a physical property, or a donor allowing someone to stay in their property or earn income from the property without getting something equal in return.
Someone who makes an interest-free or reduced-interest loan may also be seen as giving a gift.
When you make a gift other than cash, you must assess the property’s fair market value: the price a willing buyer would pay in the open market. If you’re buying a house from a family member, you might ask for a gift of equity.
Generally, the IRS does not consider these taxable gifts:
• Gifts that are not more than the annual exclusion for the calendar year
• Another person’s tuition, as long as payments are made directly to the educational institution
• Another person’s medical expenses, as long as the payments are made directly to medical service providers
• Gifts to a spouse who is a U.S. citizen
• Gifts to a political organization
• Gifts to IRS-approved charities
What Is a Gift Tax Return?
Par for the course with the IRS, there’s a form involved if you made a gift exceeding the annual limit: Form 709. It is to be filled out the year after the giving of the gift. So if a relevant gift was given in 2025, the information belongs on the 2026 tax return form.
Information on this form lets the IRS know that a gift has been given that falls within the scope of the gift tax.
Married couples may “split” gifts and essentially double their annual exclusion. If you are married and your spouse consented, you could have given up to $38,000 to an unlimited number of individuals in 2025 and 2026 with no gift or estate tax consequences.
Spouses who split gifts always have to file Form 709, even when no taxable gift was incurred.
The gift tax is tied to the estate tax. As of tax year 2025, you can leave up to $13.99 million to relatives or friends free of any federal estate tax. If you’re married, your spouse is entitled to a separate $13.99 million exemption. Clearly this is the province of high earners.
Who Files the Gift Tax Return: the Giver or the Recipient?
Taxes typically fall on the donor, not the recipient.
There may be special circumstances when the recipient will agree to pay the tax. If you make this agreement, the IRS suggests that you contact your tax professional for guidance on how to proceed.
Annual Exclusion for 2025
You could have made an unlimited number of tax-free gifts in 2025 as long as no one received more than $19,000.
If you held back, just know that you can once again make an unlimited number of tax-free gifts of up to $19,000 in 2026, when the lifetime gift tax exemption increases to $15 million per person.
Need help monitoring where your money is coming and going? A spending app lets you set budgets, organize spending, and manage upcoming bills.
When Do You Need to File a Gift Tax Return?
This follows the regular tax filing deadline, which is April 15 in 2026.
If you need a gift tax return extension when you’re not filing a tax extension for your general income tax return, file Form 8892. This will typically give you a six-month extension.
How to File a Gift Tax Return
First, you use the federal gift tax return Form 709 that’s available online through the IRS. The IRS also provides gift tax return instructions. The agency includes determining if you need to file a form and, if so, for what gifts.
You may need to decide whether you and a spouse will split the gift taxes.
Form 709 is complicated. Whether you’re a seasoned tax filer or filing taxes for the first time, a tax pro could be of great help.
You could be fined by the IRS, and the taxing authority is becoming more vigilant in levying these failure-to-pay penalties. The fine equals 0.5% for every month that the tax isn’t paid, based on the amount of the gift. So, as time goes by, the fine gets bigger, up to a maximum of 25%. If the IRS determines that fraud was involved, the fine can go up to 15%.
If this oversight isn’t discovered in a person’s lifetime, the estate could be assessed the accumulated fine.
How Long Should You Keep Gift Tax Returns?
Keep them indefinitely! They will likely be needed by the executor of your estate.
A gift tax return might inspire dread, but it’s simply a way for the IRS to track eligible gifts made in a year and over a lifetime. Most people will never pay gift taxes.
Want to keep tabs on gifts and track all of your money in one place? A money tracker app may be able to help.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
See exactly how your money comes and goes at a glance.
FAQ
What triggers a gift tax return?
The main trigger is exceeding the annual limit of what you can give without taxation. The annual amount per donee is $19,000 in both 2025 and 2026.
Do I have to file a gift tax return if I receive a gift?
In general, it’s the donor of the gift, not the recipient, who pays the tax.
What happens if I don’t file a gift tax return?
The IRS may levy fines. If it doesn’t happen in your lifetime, the situation may be uncovered by the IRS after your death, and fines can be levied on the estate.
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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
By Jacqueline DeMarco |
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Comments Off on Can a Tax Preparer File Your Taxes Without Your Signature?
There’s no denying that filing taxes can be stressful, which is why many people turn to a tax preparer to help them navigate the process. This professional can offer extra reassurance that your taxes are filed properly and may even help you maximize your refund.
But can a tax preparer file your taxes without your signature? In short, yes, they can. Keep reading to learn more about signature requirements for tax filing.
• Verify filing status through IRS tools or by phone.
• Report unauthorized filings to the IRS using specific forms.
What Is a Tax Preparer?
A tax preparer is a certified public accountant (CPA), attorney, enrolled agent, or other professional who is paid to prepare income tax returns for an individual or business. The tax preparer must have an IRS Preparer Tax Identification Number (PTIN) in order to prepare federal tax returns.
Tax preparers gain access to very personal information such as income and Social Security numbers, so this isn’t a relationship you’ll want to enter without careful consideration. Before you hire one, do your research. The IRS provides an online directory where you can find tax preparers who are near you or who have certain qualifications. You may also want to ask trusted friends and family members for referrals.
While many tax preparers can handle different types of taxes, it’s best to confirm that the tax preparer is experienced in the areas you need before hiring them. After all, a small business owner will likely have very different tax needs than an individual filing a W-2.
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What Qualifies as a Signed Tax Return?
Whether you’re preparing for tax season or are in the middle of filing your return, you probably already know how important it is to get your taxes done properly. The final step in the filing process that really can’t be skipped is signing the income tax return. If you file your taxes on your own, you need to sign the tax return. If a tax preparer helps you file your taxes, they need to sign the tax return and include their PTIN. If the return isn’t signed, the IRS won’t consider it valid.
Can a Tax Preparer File Your Taxes Without Your Signature?
Depending on their experience and area of expertise, a tax preparer may be able to offer guidance on different ways to save on taxes or help you make sense of complicated topics like income tax withholding. But these professionals can also offer a degree of convenience by signing a client’s tax return themselves and submitting it without their client’s signature. If you choose to work with a tax preparer, you’ll want to have their signature and PTIN on the tax return as proof that they prepared it.
How Do I Know if My Tax Preparer Filed My Taxes?
Tax preparers can provide peace of mind that your taxes are filed properly and hopefully help you maximize your tax refund and find potential tax breaks, like the earned income tax credit.
But if you’re wondering whether your tax preparer filed your taxes, there are ways to find out. The IRS Where’s My Refund tool, for instance, allows you to check the status of your return. You can also find out this information by calling the IRS directly. And be sure to check your inbox. If your return was filed, you should receive a confirmation and status updates by email, as long as you provided an email address.
What happens if you submit an income tax return — whether accidentally or on purpose — without any signature on it? The bad news is, the IRS does not accept unsigned income tax returns. The agency typically sends back the tax return with a notice asking you to sign and resubmit the return so it can be processed. If you fail to sign your tax return but file it on time, you likely will not be hit with a delinquency penalty, which can be good news for your budget.
Of course, working with a tax preparer isn’t the only way to take control of your finances. SoFi’s money tracker app can also help you stay on track year-round. You can keep tabs on multiple account balances — and your credit scores — in one place. You can also set savings goals and review your spending, so there are no surprises come tax time.
A tax preparer can help you navigate the tax filing process and, hopefully, maximize your refund. These professionals can also sign your tax return and submit it without your signature, though you may choose to sign it as well. If you want to check the status of your return, you can use the IRS Where’s My Refund tool, call the agency directly, or check your inbox. The IRS typically emails a confirmation and status updates on your return, as long as you provided an email address when you filed.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
See exactly how your money comes and goes at a glance.
FAQ
Can a tax preparer e-file your taxes without your signature?
Yes, a tax preparer can e-file a client’s taxes without the taxpayer’s signature. The key here is that the tax preparer must sign the income tax return in order for it to be eligible for processing. The tax preparer’s certification number also has to be included on the tax return. If the tax preparer does not sign the income tax return, the taxpayer must sign it before it can be e-filed.
What should you do if a tax preparer files your taxes without your consent?
If you believe a tax preparer filed your taxes without your consent, you should report it to the IRS using Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit, in addition to Form 14157.
Will the IRS accept an unsigned tax return?
No, the IRS will not accept an unsigned income tax return as they don’t consider it valid. If someone tries to file an unsigned tax return, the IRS will send it back and request a signature. The taxpayer or their tax preparer must sign the income tax return for it to be valid.
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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There are a grand total of 13 states that don’t tax retirement income, and nine of those states don’t tax income at all. This can be important for seniors to know, as holding onto as much retirement income as possible can be important — whether it’s coming from pensions, Social Security, a 401(k), or elsewhere.
Equally important to know: As of December 2025, there are 15 states that don’t tax pensions, and 41 states — plus the District of Columbia — that don’t tax Social Security benefits. Paying less in taxes can lower the strain on a retiree’s budget and help their money last longer. That becomes especially important when and if inflation shrinks purchasing power — as it has in recent years.
• Nine states do not tax income, including retirement income, providing significant savings for retirees.
• Fifteen states exclude pension income from taxes, while 41 states and the District of Columbia do not tax Social Security benefits.
• Nevada, Wyoming, and Delaware offer low property and estate taxes, benefiting retirees.
• Dual residency is an option that can influence tax obligations for retirees.
• When selecting a state, consider the overall cost of living and other taxes, not just income tax.
How Much Can State Taxes Take Out of Retirement Income?
Each state taxes income, including retirement income, differently. So, there are different states that don’t tax pensions, and then there are states that don’t tax Social Security, etc.
Accordingly, how much of a bite state taxes take out of retirement income can depend on several factors, including the applicable tax rate where you live, and your specific tax brackets.
Taxes can be an important consideration when choosing where to retire, and when to retire.
Getting your financial house in order is also important. A money tracker app can give you a bird’s eye view of your finances and help you keep tabs on where your money is coming and going.
Understanding State Income Tax
As of December 2025, 41 states levy taxes on wage and salary income, while nine states do not assess individual income tax. Washington taxes capital gains for certain high-income individuals.
In some states, the same tax rate applies to all taxable income. Other states use a graduated tax system with individual tax brackets, similar to the way the federal tax system works.
California has the highest marginal tax rate, at 13.30%. Other states with higher tax rates include Hawaii (11.0%), New York (10.90%), New Jersey (10.75%), and Oregon (9.90%). Aside from the states that have no income tax, the lowest marginal tax rate belongs to North Dakota and Arizona, which both have an income tax rate of 2.50%.
Further, if you were to look at the average retirement savings by state, it may help provide some more insight into where many retirees live — and why.
15 States That Don’t Tax Pensions
Altogether, there are 15 states that don’t tax federal or private pension plans. Some of these are states that have no income tax at all; others have provisions in state law that make them states with no pension tax. Here are which states don’t tax pensions:
State
Pension Tax Policy
Alabama
Pension income excluded from state income tax
Alaska
No state income tax
Florida
No state income tax
Hawaii
Qualifying pension income excluded from state tax
Illinois
Pension income excluded from state tax
Iowa
Qualified pension income excluded from state tax
Mississippi
Pension income excluded from state tax
Nevada
No state income tax
New Hampshire
Pension income excluded from state tax
Pennsylvania
Pension income excluded from state tax
South Dakota
No state income tax
Tennessee
No state income tax
Texas
No state income tax
Washington
Only taxes capital gains for high-income earners
Wyoming
No state income tax
Keep in mind that state or local government employee pension benefits may be treated differently. New York, for example, specifically excludes pension benefits paid by state or local government agencies from state income tax. If you move to another state, however, that state could tax your New York pension benefits.
41 States That Don’t Tax Social Security
Understandably, many people have questions about Social Security, including whether the program will remain solvent in the future. Another big one: How will taxes affect your benefit amount? That’s why it’s important to know which states don’t tax Social Security.
The good news is that 41 states and the District of Columbia do not tax Social Security benefits. In 2026, West Virginia will begin phasing out its tax on Social Security benefits. For 2026 tax returns (filed in 2027), benefits will be completely exempt.
So if you’ve chosen to retire, or at least are thinking about choosing a retirement date (which can affect your total Social Security payouts), you don’t need to worry about it. Similar to the states that don’t tax pensions, these states either have no income tax at all, offer exemptions, or have elected to exclude Social Security benefits from taxable income calculations.
State
Social Security Tax Policy
State
Social Security Tax Policy
Alabama
Not included in income tax calculations
Missouri
Not included in income tax calculations
Alaska
No state income tax
Nebraska
Not included in income tax calculations
Arizona
Not included in income tax calculations
Nevada
No state income tax
Arkansas
Not included in income tax calculations
New Hampshire
Not included in income tax calculations
California
Not included in income tax calculations
New Jersey
Not included in income tax calculations
Delaware
Not included in income tax calculations
New York
Not included in income tax calculations
Florida
No state income tax
North Carolina
Not included in income tax calculations
Georgia
Not included in income tax calculations
North Dakota
Not included in income tax calculations
Hawaii
Not included in income tax calculations
Ohio
Not included in income tax calculations
Idaho
Not included in income tax calculations
Oklahoma
Not included in income tax calculations
Illinois
Not included in income tax calculations
Oregon
Not included in income tax calculations
Indiana
Not included in income tax calculations
Pennsylvania
Not included in income tax calculations
Iowa
Not included in income tax calculations
South Carolina
Not included in income tax calculations
Kentucky
Not included in income tax calculations
South Dakota
No state income tax
Louisiana
Not included in income tax calculations
Tennessee
No state income tax
Maine
Not included in income tax calculations
Texas
No state income tax
Maryland
Not included in income tax calculations
Virginia
Not included in income tax calculations
Massachusetts
Not included in income tax calculations
Washington
Not included in income tax calculations
Michigan
Not included in income tax calculations
Washington, D.C.
Not included in income tax calculations
Mississippi
Not included in income tax calculations
Wisconsin
Not included in income tax calculations
Wyoming
No state income tax
Montana and New Mexico do tax Social Security benefits, but with modifications and exceptions.
9 States That Don’t Tax Capital Gains
Federal capital gains tax applies when an investment or asset is sold for more than its original purchase price. The short-term capital gains tax rate applies to investments held for less than one year. Investments held for longer than one year are subject to the long-term capital gains tax.
States can also tax capital gains, though not all of them do. The states that do not tax capital gains are the same states that do not have income tax or have special tax rules on which income is taxable. As of 2026, they include:
• Alaska
• Florida
• Missouri
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Wyoming
As far as how much capital gains are taxed at the state level, the tax rate you’ll pay will depend on where you live. Some states offer more favorable tax treatment than others for capital gains.
13 States That Don’t Tax 401(k), TSP, or IRA Income
Yet another potential area where states can generate tax revenue is by taxing retirement accounts such as 401(k) plans, individual retirement accounts (IRAs), and Thrift Savings Plans (TSPs). In all, there are 13 states that don’t levy taxes on retirement income derived from these sources:
• Alaska
• Florida
• Illinois
• Iowa
• Mississippi
• Nevada
• New Hampshire
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming
34 States That Don’t Tax Retirement Income From the Military
There are certain states that tax military retirement income, but most do not. In all, 34 states don’t tax military retirement income, including those that don’t have income taxes, and others that have specifically carved out exceptions for military retirement income.
• Alabama
• Alaska
• Arizona
• Arkansas
• Connecticut
• Florida
• Hawaii
• Illinois
• Indiana
• Iowa
• Kansas
• Louisiana
• Maine
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Washington
• Wisconsin
• Wyoming
9 States With No Income Tax
As covered, there are a lot of different tax levels and tax types — some include different types of retirement income, some just involve plain old income tax itself. As such, it’s not always easy to determine which states don’t tax retirement income whatsoever. These states, however, do not levy income tax.
• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming
5 States With Low Retirement Income Taxes
Taking everything into account — taxes on income, pensions, Social Security, military retirement income, and more — there are several states that offer retirees relatively low retirement income taxes. Aside from the nine that don’t tax income at all, these states may be a good option for seniors, as they offer low retirement income taxes in one form or another:
• Alabama
• Mississippi
• Georgia
• Pennsylvania
• Washington
Which States Have the Lowest Overall Tax Burden on Retirees?
Again, there is a lot to consider when trying to determine an overall tax burden, especially on retirees. But if you were to whittle down a list of a handful of states in which the tax burden is the absolute least on retirees? It would come down to the states with the overall smallest income tax burden, and a few other factors.
Delaware
Delaware hasn’t been discussed much, and though it does have state income taxes, a few other factors make it particularly appealing for retirees. Specifically, its state income tax rate tends to be relatively low (2.2% – 6.6%), and it has low property taxes, no sales taxes, and no applicable estate taxes.
Nevada
Nevada is a state with no state income taxes — a big win for retirees — and that also has relatively low property taxes, and no estate taxes. It also doesn’t tax income from most retirement accounts, or military retirement income.
Wyoming
Wyoming is similar to Nevada in that it has no state income taxes, low property taxes, and no estate taxes. There are applicable sales taxes, but it’s a drop in the bucket compared to the overall tax burdens seen in other states.
Can You Have Dual State Residency?
Generally, most people are residents of just one state. It is possible, however, to have dual residency in two different states. This can happen if you live in each state for part of the year to attend school or to work.
The state of Virginia, for example, distinguishes between residents who maintain a home in the state for 183 days or more during the year and domiciliary residents who claim Virginia as their legal state of residence. Under state law, it’s possible to be a resident of Virginia and a domiciliary resident of another state.
For instance, a college student from California who lives in Virginia during the school year would be a dual resident. However, you can have only one domicile — in this example, it would be California.
If you live and earn taxable income in two different states during the year, you may have to file tax returns in both those states unless a reciprocity agreement exists. Reciprocity agreements ensure taxpayers only pay income tax to their home state, even if they work in another one.
What to Consider Before Moving to a Tax-Friendly State
Moving to a state that doesn’t tax pensions and Social Security could yield income tax savings, but it’s important to consider the bigger financial picture. Paying no or fewer income taxes on retirement benefits may not be much of a bargain if you’re stuck paying higher property taxes, or your heirs are left with steep inheritance taxes, for instance.
Also consider the overall cost of living. If everyday essentials such as housing, food, and gas are higher in a state that has no income tax, then your retirement benefits may have less purchasing power overall. If costs end up being higher than you anticipated, you might end up working after retirement to fill any retirement income shortfalls.
The Takeaway
There are a number of states that tend to be more tax-friendly for retirees, and those generally include the states that don’t levy any income taxes. That list comprises states such as Alaska, Nevada, Texas, Florida, and Tennessee. But there are other potential taxes to take into consideration, and states all have different tax rules in regards to pensions, retirement accounts, capital gains, and more.
As such, if you’re hoping to save on taxes during retirement, you’ll need to do a little digging into the specifics to see what might affect you, given your unique financial picture. It’s wise to take into account other tax types as well (property taxes, etc.), and overall cost of living. Doing a thorough cost-benefit analysis before deciding to move could be beneficial.
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FAQ
What is the most tax-friendly state to retire in?
The most tax-friendly states for retirees are states that don’t tax pensions and Social Security, and have a low tax-profile overall for sales and property tax. Some of the best states for retirees who want to avoid high taxes include Alabama, Florida, Georgia, Mississippi, Nevada, South Dakota, and Wyoming.
Which states have no 401(k) tax?
States that do not tax 401(k) distributions include: Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Which states do not tax pensions?
States that do not tax pensions include the nine states that have no income tax — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Additionally, six states — Alabama, Hawaii, Illinois, Iowa, Mississippi, and Pennsylvania — exclude pension income from state taxation.
How can I avoid paying taxes on retirement income?
The simplest way to avoid paying taxes on retirement income is to move to a state that has the smallest applicable tax burden on retirement income sources. That would include the short list of nine states that don’t have any sorts of state income tax. You may also want to consult a professional.
Which states are tax-free for Social Security?
There are a grand total of 41 states — plus the District of Columbia — that don’t tax Social Security benefits. That list includes the nine states that don’t tax income at all.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
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Comments Off on What Is the Due Diligence Tax Preparer Penalty?
The due diligence tax preparer penalty is a fine for income tax preparers who fail to meet due diligence requirements when preparing tax returns that claim certain credits or head of household filing status.
The IRS takes due diligence very seriously because fraudulent claims are becoming increasingly common. The agency even conducts “Knock and Talk” visits as part of its Preparer Compliance Program to educate preparers, discuss errors, and explain the risks of not providing accurate tax returns.
Let’s take a closer look at what due diligence for tax preparers means, how preparers should perform it, and the penalties for not following the rules.
• The penalty for tax preparers failing due diligence in 2026 is $650 per failure.
• Maximum penalty for a single return, if all four benefits are claimed, is $2,600.
• Tax preparers must complete Form 8867, compute credits, conduct knowledge tests, and retain records for three years.
• IRS conducts “Knock and Talk” visits to verify compliance with due diligence requirements.
• Willful failures can result in injunctions and criminal investigation by the IRS.
What Is Due Diligence for Tax Preparers?
People use tax experts to prepare their income taxes for them because the experts know how to take advantage of tax rules. By claiming all possible tax credits or tax deductions, clients keep more of the money they earn rather than handing it over to the IRS.
U.S. income tax preparers must adhere to tax laws and conduct due diligence when they prepare tax returns for taxpayers who claim certain tax credits or head of household (HOH) filing status. HOH status gives an unmarried filer with a qualifying dependent certain tax advantages that a single filer does not have.
The IRS requires due diligence from tax preparers to make sure their clients really do qualify for the credits or HOH status because they will pay less tax to the IRS.
The credits that fall under due diligence are the following:
What Is the Due Diligence Tax Preparer Penalty for 2026?
Each failure on a return filed in 2026 carries a penalty of $650. (By comparison, the penalty for returns filed in 2025 is $635 per failure.) If a preparer claims all four benefits on a return and fails to perform due diligence for each benefit, the penalty for that return is $2,600. The preparer can also be referred to the Office of Professional Responsibility, or even the IRS Criminal Investigation Unit, if their failure to comply is deemed willful. It’s also possible that the IRS may request the Department of Justice to seek an injunction to stop the preparer from preparing any future returns.
What Are the Four Due Diligence Requirements?
To comply with due diligence and avoid a penalty, the IRS requires a tax preparer to do the following:
Complete and Submit Form 8867
The form must be based on information obtained from the client. It can be submitted to the IRS with the e-Filed return or claim, or included in the filed return or claim.
Compute the Credits
The preparer must complete the appropriate worksheets for each applicable credit (such as those found in the instructions for Form 1040 or Form 8863) and keep records of the information and calculations used.
Conduct the Knowledge Test
The preparer must interview the client to verify that the information on income tax withholdings, earnings, dependents, and all relevant data are correct, consistent, and complete. The preparer must also keep a record of the interview.
Keep the Records for at Least Three Years
Documents can be held in electronic or paper format.
Let’s say a taxpayer who is preparing for tax season wants to claim the earned income tax credit (EITC). This credit is calculated by multiplying the taxpayer’s income by a percentage determined by the IRS. The amount of the credit phases out above certain income levels that vary depending on the number of qualifying children the taxpayer has. A due diligence penalty might be levied if the tax preparer makes one of the following common errors:
• The tax preparer fails to verify if a child qualifies under the EITC in terms of their age, relationship, or residency requirements.
• The tax preparer files claiming the client is single or head of household even though the taxpayer is married.
• The tax preparer reports inaccurate income or expenses for the client.
The IRS gives more specific guidelines to tax preparers in Publication 4687. The publication gives specific examples of situations where the practitioner should ask further questions to fulfill the due diligence requirement. For example, “A 22-year-old client wants to claim two sons, ages 10 and 11, as qualifying children for the EITC.”
In this case, the IRS recommends the tax preparer does some further checking because the children’s ages are so close to the client’s age. The preparer is expected to make reasonable inquiries to verify the children’s relationship with the client.
Another example from the IRS: “A client has two qualifying children and wants to claim the EITC. She claims to have earned $20,000 in income from her Schedule C business and had no business expenses.”
The IRS considers it unusual for someone who is self-employed to have no business expenses. Due diligence expects the preparer to ask additional reasonable questions to determine whether their client is carrying on a business and whether the information about her income and expenses are correct.
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Pros and Cons of the Due Diligence Penalty
The due diligence requirements demand extra work from tax preparers, such as conducting in-depth interviews and storing documents. However, preparers can establish policies and procedures with checklists and consistent practices, which should keep them organized and prevent them from falling foul of the IRS.
Pros
• If the tax preparer can show they have “reasonable cause” for an understatement on the return, and the preparer acted in “good faith” while preparing the return, the preparer generally will not be penalized.
• Following a due diligence checklist for every tax return helps the tax preparer minimize mistakes and keep their process consistent.
• If a checklist is always followed, it is more likely that the preparer acts in good faith while preparing returns and will not be penalized.
Cons
• Tax preparers may need to develop a system and a checklist for due diligence cases and follow it consistently.
• Tax preparers need to keep meticulous records of interviews and documents.
• Tax preparers must stay up to date with current and new requirements related to due diligence, as the IRS rulings change frequently to help reduce tax fraud and abuse.
Staying organized is essential for tax preparers, but it’s also important for taxpayers to have their finances in order during tax season and beyond. A money tracker app can help.
The Takeaway
The IRS takes due diligence seriously when taxpayers are claiming certain tax benefits or head of household status. Therefore, it’s critical that tax preparers follow the due diligence rules and develop consistent processes and checklists to ensure they comply. Due diligence penalties are significant, and a preparer may even be referred to the Department of Justice and prevented from practicing. The due diligence requirements may mean extra work for tax preparers, such as conducting in-depth interviews, creating checklists, and storing documents. However, the extra work is well worth it to keep them organized and on the right side of the IRS.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
See exactly how your money comes and goes at a glance.
FAQ
What is the due diligence penalty for 2026?
The penalty for returns filed in 2026 is $650 for each failure on a return. If a preparer claims all four benefits on a return and fails to perform due diligence for each benefit, the penalty for that return is $2,600.
What happens to a paid preparer who fails to meet the due diligence requirements IRC 6695 G?
Under IRC 6695 G, the penalty in calendar year 2026 is $650 for each failure of a tax preparer to meet due diligence requirements and determine a taxpayer’s eligibility for the head of household filing status or the following credits:
• Any dependent credit, including the Additional Child Tax Credit and Child Tax Credit
• American Opportunity Credit
• Earned Income Tax Credit
• Lifetime Learning Credit
What happens if a tax preparer doesn’t meet the due diligence requirements?
In addition to facing penalties, a tax preparer who does not do due diligence will be referred to the Office of Professional Responsibility. If the failure is deemed willful, the preparer can be referred to the IRS Criminal Investigation, and the Department of Justice may take away the right for the preparer to work on any future returns.
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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
