RETURN Act

Section 2, amending section 6402(l)(1) of the Internal Revenue Code, requires the Internal Revenue Service to provide taxpayers with a detailed written explanation if their claim for refund is disallowed in whole or in part. This holds officials accountable and helps regular folks understand why a decision was made.

Section 2, amending section 6402(l)(1)(B), mandates that the written explanation include instructions for appealing the disallowance to the Internal Revenue Service Independent Office of Appeals for taxpayers who are entitled to an appeal. This gives people clear direction on how to fight back if they believe a mistake was made.

Section 2, amending section 6402(l)(2)(A), states that if the Internal Revenue Service fails to make a timely determination on a refund claim, the overpayment rate for interest is increased by 1 percentage point. This penalizes the government for dragging its feet and financially benefits the taxpayer for the delay.

Section 2, amending section 6402(l)(2)(B), places a hard limitation on the interest penalty collected from the government, stating that the increase in interest on an overpayment shall not exceed $500. This caps the benefit regular people can receive when the government fails to process their refunds on time.

Section 2, amending section 6402(l)(3), specifies that for frivolous claims, the Internal Revenue Service does not have to provide a detailed explanation and only needs to mail a denial notice. While aimed at bogus claims, the text relies strictly on definitions where a Federal court and the Secretary have deemed the position frivolous, which could create burdens if a valid claim is mistakenly lumped into this category without detailed upfront feedback.