The RETURN Act requires the Internal Revenue Service to review and respond to taxpayer refund claims within 12 months, or face penalties. When the IRS denies a refund claim, it must provide the taxpayer with a detailed written explanation and instructions on how to appeal the decision. If the IRS fails to meet the 12-month deadline, the interest rate on the overpayment increases by one percentage point, though the penalty is capped at $500 per claim (adjusted for inflation after 2026). The bill exempts frivolous claims, which are defined as those based on positions already determined to be frivolous by federal courts, from these new requirements. The law takes effect 12 months after enactment and applies to all refund claims received after that date.
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