WASHINGTON, D.C.- After years of complaints from taxpayers facing long delays in receiving their refunds, a provision in the newly proposed Taxpayer Assistance and Service Act (TAS Act) might offer some real relief. Known as Section 603, this part of the legislation is designed to fix one of the IRS’s most frustrating issues: the lack of any deadline for responding to refund claims.
The new rule, if enacted, would give the IRS a hard deadline of 36 months to issue a decision on refund claims and it wouldn’t let the agency off the hook if it fails to act in time. In fact, if the IRS doesn’t respond within the new timeline, the taxpayer could treat the inaction as a denial and move forward legally. More importantly, the IRS would be required to pay extra interest on any refund that’s eventually issued, a long-overdue incentive for them to move faster.
The Background: Why Section 603 Was Introduced
The refund process has always been a pain point for both individual taxpayers and small business filers. Although many returns are processed fairly quickly especially those filed electronically, millions of refunds are delayed each year for a range of reasons including manual review flags, identity verification requests, or staffing backlogs at the IRS.
But the real problem lies in the cases where taxpayers file formal administrative refund claims under IRC 6511. These are often filed when a taxpayer overpays or later discovers an error. The IRS, in these situations, hasn’t been held to any set deadline for responding, which means some claims have simply sat in limbo for years.
“We’ve seen cases where taxpayers waited three, even four years without any answer,” said a former tax official who now works in private tax advocacy. “That’s not just poor service that’s a denial of basic procedural rights.”
Section 603 is aimed precisely at solving this. The provision is part of a broader legislative effort introduced by Senators Mike Crapo and Ron Wyden back in January 2025, as part of the Senate Finance Committee’s effort to restore faith in the tax system and modernize outdated IRS practices.
Legislative Background: How Section 603 Came Into Focus
On January 30, 2025, the Chairman and ranking member of the Senate Finance Committee – Senator Mike Crapo (Republican-Idaho) and Senator Ron Wyden (Democrat-Oregon), respectively – introduced the TAS Act (Taxpayer Assistance and Service Act). This comprehensive package was intended to fix entrenched problems related to how the IRS communicates with taxpayers, resolves bureaucratic delays, and protects taxpayers’ rights.
Section 603 emerged as a focal point because of growing frustration over how the IRS processes formal refund claims. In past years, lawmakers received countless reports of refund claims that lingered unresolved for years, often with no explanation. Many of these delays went unchecked because there was no legal deadline for the IRS to respond, a gap that left taxpayers without options unless they took legal action.
Section 603 attempts to correct this legal lacuna and to provide transparency and finality to what would otherwise be a warren of murkiness. While there is bipartisan agreement around the core idea, lawmakers are still haggling over the practical terms and enforcement mechanisms that should be attached to it.
The Background: Why Section 603 Was Introduced
Under current law, taxpayers who overpaid their taxes can file for a refund using IRC 6511. But even when those claims are timely and legitimate, the IRS has no obligation to respond within a specific period. That means refund claims, especially ones that require further review , can simply sit in limbo.
This lack of a defined timeline has led to a broken process where:
- Refund claims may go unaddressed for years
- Taxpayers receive no updates or explanations
- Individuals are forced to sue the IRS just to trigger a response
- The government holds on to taxpayer money without cause
The problem isn’t limited to a few isolated cases. Millions of taxpayers experienced delays of 6 months to 3 years in recent tax seasons particularly during the pandemic and post-pandemic years. Those affected include not just individuals, but also small businesses awaiting large refunds due to overpayment or tax credits.
These delays don’t just create inconvenience. They also:
- Disrupt family finances
- Limit working capital for small businesses
- Undermine public confidence in tax fairness
Section 603 tries to close this gap by putting a clear 36-month deadline on IRS refund decisions, and tying in financial consequences if they fail to act.
What Section 603 Proposes to Change
Here’s what the proposed rule under Section 603 would do:
- Mandates a response deadline: The IRS must review a timely refund claim and send the taxpayer a notice of determination within 36 months.
- Defines what happens if they don’t respond: If the IRS fails to act within that timeframe, the taxpayer can treat the silence as a denial, which allows them to pursue the matter legally.
- Requires detailed explanations: If a claim is denied, the IRS must clearly explain why and inform the taxpayer of appeal rights.
- Adds financial consequences: The agency must pay an extra 1% interest (up to $1,000, adjusted annually) on refunds delayed beyond the 36-month limit.
That last point is significant. It introduces a real financial cost to IRS delay something that hasn’t existed before.
The Purple Book Proposal: An Alternative from the Taxpayer Advocate
While Section 603 introduces meaningful deadlines, the National Taxpayer Advocate’s Office believes the provision doesn’t go far enough. In its 2025 Purple Book, the Advocate recommends a much stricter framework.
Here’s how the Advocate’s proposal differs:
- 12-month deadline instead of 36 months
- If the IRS fails to act within that time, it must pay 2% additional interest
The IRS would have flexibility to either approve, deny, or begin an audit, but it must take some action
The rationale behind this tighter timeline is based on current law. As it stands, taxpayers already have the right to sue the IRS after just six months of inaction on a refund claim. The Purple Book authors argue that if Congress already thinks six months is reasonable for initiating legal action, the IRS should be expected to provide a decision within a year, especially now with improved processing technology and staffing.
The Advocate’s team sees this as a more balanced and enforceable solution that better aligns with taxpayer expectations and legal fairness.
Why This Matters: A Closer Look at the Impact
For Taxpayers:
This change would finally give individuals a sense of predictability. Instead of waiting endlessly with no communication, taxpayers would know exactly how long the IRS has to respond. It also opens the door to better appeal rights and ensures that the IRS can’t just let cases fall through the cracks.
And for those waiting years to get their own overpaid taxes back? They’ll finally get compensated for the wait.
For Small Business Owners:
Many small businesses rely on periodic refunds whether it’s from payroll overpayments, amended returns, or COVID-era tax credits. Delays in processing these refunds can strain cash flow, especially in sectors where margins are already thin.
Section 603 could help small business owners reclaim that liquidity faster, especially when their refund claims are caught up in a bureaucratic backlog.
For the IRS:
While the reform is good for taxpayers, it could add new operational pressure on the IRS. The agency has already acknowledged capacity issues, and critics point out that enforcing a 36-month rule without increased staffing or better systems may lead to even more backlogs unless implementation is handled carefully.
A Shift in Power: More Rights for the Taxpayer
What’s unique about Section 603 is that it doesn’t just tweak a deadline it changes the relationship between the IRS and the taxpayer. For the first time, the IRS would be held accountable with:
- Mandatory explanations
- Deadline-based responses
- Financial penalties for delay
- Clearer legal options for taxpayers
This aligns with the Taxpayer Bill of Rights, which includes rights such as:
- The right to finality
- The right to quality service
- The right to challenge the IRS and be heard
Many of these rights have existed in theory but not in practice. Section 603 could change that.
A Shift in Power: More Rights for the Taxpayer
Interestingly, the National Taxpayer Advocate’s office (which supports Section 603) has also proposed a stricter version of this provision in their 2025 Purple Book.
Here’s what their revised proposal suggests:
- Cut the 36-month period to just 12 months
- If the IRS fails to act, pay even more interest (2% extra)
- Allow the IRS flexibility: instead of requiring a final decision, let them initiate an audit or partially approve/deny the claim
The Advocate argues that a 12-month window is far more aligned with what Congress has historically expected pointing out that under current law, taxpayers can sue the IRS after six months of silence.
What You Should Do Now (If You're Waiting for a Refund)
Scenario | What to Do |
You filed a refund claim and it’s been over a year | Contact the IRS and consider involving the Taxpayer Advocate Service |
You’re preparing an amended return | Keep copies of all correspondence, including the date mailed and IRS acknowledgment |
You depend on a business refund | Monitor the status regularly and consider submitting Form 911 if your delay causes financial hardship |
You want to plan future filings smartly | Watch for Section 603 updates and track implementation if it passes |
Related Guides from GlimMarket
- How to File a Refund Claim Under IRC § 6511
- Taxpayer Bill of Rights: What You’re Entitled To
- Handling Long Refund Delays: Tips for Businesses and Individuals
- Understanding the IRS Appeal Process in 2025
Related Articles
What's Next?
