A bill to amend the Internal Revenue Code of 1986 to improve the process for providing refunds to taxpayers.

119th Congress Introduced by Michael Bennet and 1 co-sponsor

The bill lets CNC taxpayers’ overpayments be refunded up to the amount of a refundable §32 credit, bypassing offsets for those cases.

Introduced in Senate

Summary of Bill: S.5142 (118th/119th Congress) – "A bill to amend the Internal Revenue Code of 1986 to improve the process for providing refunds to taxpayers"

Main purpose and intent

The bill seeks to modify the Internal Revenue Code to streamline and accelerate the refund process for certain tax overpayments, specifically by automating and limiting offset actions for taxpayers who meet defined criteria.

It aims to ensure that certain overpayments are refunded up to the amount of a qualifying tax credit, with protections tied to the taxpayer’s status as "currently not collectible" (CNC).

Key provisions and changes

Automation of refund offset bypass (Section 6402(a) changes)

The bill reorganizes the existing text of Section 6402(a) to introduce a new special rule.
New Paragraph (2): Establishes a special rule for certain overpayments:
- If an overpayment for a taxable year corresponds to a credit available to an “applicable taxpayer” under section 32, the Secretary must refund the overpayment up to the amount of that credit for the taxable year, subject to other applicable subsections (c, d, e, f).
New Paragraph (3): Defines “applicable taxpayer” as a taxpayer who has been classified by the Secretary as currently not collectible (CNC) prior to the date the refund was requested.
These changes effectively bypass automated refund offsets for CNC taxpayers whose overpayment is eligible for the earned income credit (EIC) or other refundable credits under §32, to a limit equal to the credit amount.

Effective date

The amendments apply to offsets made 12 months after the date of enactment of the bill.

Who would be affected

Applicable taxpayers: Taxpayers who have been classified as currently not collectible (CNC) by the IRS and who have an overpayment for a year with a corresponding refundable credit under section 32 (e.g., earned income tax credit, and potentially other credits referenced in §32).

Humans impacted: Taxpayers who are CNC and have refundable tax credits that would otherwise be reduced or offset via automated refund processes. The bill would allow refunds up to the credit amount without triggering offset in those cases, subject to existing limitations.

Procedural and timeline considerations

Implementation timeline: The policy change would take effect for refund offsets occurring more than 12 months after enactment.

Administrative interaction: The bill directs the Secretary to refund up to the credit amount for the specified cases, within existing statutory constraints (subsections c, d, e, and f of §6402).

Practical impact and considerations

Potentially faster and fuller refunds for CNC taxpayers with qualifying refundable credits, reducing delays caused by automated offset programs.

Could affect federal Treasury cash flow in scenarios where many CNC taxpayers are eligible for such refunds, though limits tied to the credit amount cap the exposure.

Requires administrative confirmation that the overpayment corresponds to a §32 credit and that the taxpayer is CNC, aligning with IRS processes for CNC designation and credit eligibility.

If you’d like, I can provide a brief comparison to current law or outline potential implementation questions for IRS administrative offices.