H.R. 9481: Restoring Efficiency in Taxpayer Updates, Refunds, and Notifications Act

This bill would change how the IRS handles tax refund claims when a taxpayer asks for money back because they believe they overpaid taxes.

What the bill would require the IRS to do

Under the bill, the IRS would have to review refund claims and make a decision within 12 months of receiving them, unless the taxpayer and the IRS agree to a different deadline.

If the IRS decides to deny all or part of a refund claim, it would have to send the taxpayer a detailed written explanation of why the claim was denied. That explanation would have to be mailed to the taxpayer’s last known address. If the taxpayer can appeal, the notice would also have to include instructions for appealing to the IRS Independent Office of Appeals.

What happens if the IRS misses the deadline

If the IRS does not review and decide on the claim by the required date, the bill would increase the interest rate paid on the overpayment by 1 percentage point for the time after the deadline.

However, there would be a cap on that added interest. The extra interest could not exceed $500 per refund claim. Starting with claims filed in years after 2026, that $500 cap would be adjusted for inflation and rounded to the nearest $50.

Frivolous refund claims

The bill makes a separate rule for frivolous claims, meaning claims based on tax positions that a federal court has already found frivolous and that the IRS has also identified as frivolous for penalty purposes.

For those claims, the IRS would not have to provide the detailed explanation described above. Instead, it would only have to mail a written notice that the claim was denied by the deadline.

When the changes would take effect

The new rules would apply to refund claims received after the date that is 12 months after the bill becomes law.

Relevant Companies

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