Lets taxpayers avoid paying federal taxes on interest from IRS overpayments if they win an audit or lawsuit.
This bill would let taxpayers keep all the interest money the IRS pays them when the IRS made a mistake and overcharged them. Currently, this interest is taxed as income, but this bill would make it tax-free. This change would apply to taxpayers who win an audit or a lawsuit against the IRS, starting with tax years after December 31, 2025.
Today, interest paid by the Internal Revenue Service to taxpayers on overpayments, including those from audits or lawsuits, is generally considered taxable income. If this bill becomes law, this specific type of interest would be excluded from gross income and would not be subject to federal income tax, starting with tax years after December 31, 2025.
S 3587 · 119th Congress · AI Summary by gemini-2.5-flash · 9/10
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