Bill Summary
The "Cutting Paperwork for Taxpayers Act" is a proposed amendment to the Internal Revenue Code that aims to simplify tax reporting for individuals and small businesses. Specifically, it seeks to exclude interest received on tax overpayments from gross income. This means that if an individual or an eligible small business receives interest from the IRS due to overpaid taxes, that interest will not be counted as taxable income. The change is intended to reduce the tax burden and administrative complexity for taxpayers, becoming effective for taxable years starting after the enactment of the legislation.
Possible Impacts
The "Cutting Paperwork for Taxpayers Act" aims to exclude interest paid on tax overpayments from gross income for individuals and small businesses. Here are three examples of how this legislation could affect people:
1. **Increased Disposable Income**: Individuals and small businesses that previously had to report interest received on tax overpayments as taxable income will now see an increase in their disposable income. This means they can retain more of their funds without the burden of additional taxes, allowing for greater spending on personal needs, business investments, or savings.
2. **Simplified Tax Reporting**: By excluding this interest from gross income, taxpayers will have a simpler tax filing process. Individuals and small business owners will have less paperwork to manage, reducing the time and resources spent on tax preparation. This change could lead to fewer errors in tax filings and decrease the likelihood of audits related to interest income.
3. **Encouragement of Compliance**: The legislation may encourage taxpayers to be more proactive in ensuring their tax payments are accurate. Knowing that any overpayment will result in non-taxable interest could motivate individuals and small businesses to monitor their tax obligations more closely, potentially leading to better overall compliance with tax laws and reduced instances of underreporting.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4826 Introduced in House (IH)]
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119th CONGRESS
1st Session
H. R. 4826
To amend the Internal Revenue Code of 1986 to exclude from gross income
any interest paid on an overpayment of tax in the case of an individual
or small business.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 29, 2025
Mr. Vindman (for himself and Mrs. Kim) introduced the following bill;
which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to exclude from gross income
any interest paid on an overpayment of tax in the case of an individual
or small business.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Cutting Paperwork for Taxpayers
Act''.
SEC. 2. INTEREST RECEIVED ON OVERPAYMENTS.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting before section
140 the following new section:
``SEC. 139J. INTEREST RECEIVED ON TAX OVERPAYMENTS.
``In the case of an individual or an eligible small business
described in section 44(b)(1), gross income shall not include any
interest allowed and paid upon an overpayment of tax pursuant to
section 6611.''.
(b) Clerical Amendment.--The table of contents for Part III of
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is
amended by inserting before the item relating to section 140 the
following new item:
``139J. Interest received on tax overpayments.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this section.
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