Disputed IRS debts would pause refund deadlines under new bill

What does this do?

HR 6506 pauses the deadline to file a refund claim while a taxpayer is formally disputing an IRS collection action such as a lien or levy, so the right to claim a refund cannot expire during an ongoing case. The pause ends if the taxpayer drops their legal challenge or misses a court deadline. The bill also bars the IRS from automatically applying a refund to a disputed tax debt without the taxpayer's agreement, and it gives the U.S. Tax Court authority to review the underlying disputed tax amount and to extend the 30-day filing window for good cause.

Who does it affect?

The bill affects any U.S. taxpayer who is currently in or enters a formal dispute with the IRS over a collection action such as a tax lien or levy. The U.S. Tax Court gains expanded jurisdiction under the measure.

Why does it matter?

Refund claim deadlines currently continue to run during active disputes, which can cause taxpayers to lose refund rights before their cases are resolved. Allowing the IRS to offset refunds against disputed amounts during open cases creates financial pressure on taxpayers whose liability has not yet been determined.

Where does it stand?