The regular 2026 tax filing season concluded last month, and many taxpayers have already received their refunds. However, there is another financial development that could impact tens of millions of Americans: the potential for refunds on tax penalties and interest incurred during the COVID-19 pandemic.
These refunds hinge on a recent court decision, which the government may choose to appeal. Erin M. Collins, the national taxpayer advocate and head of a group within the Internal Revenue Service dedicated to taxpayer advocacy, emphasizes the importance of filing claims with the I.R.S. by July 10 to maintain eligibility in case the ruling stands. Ms. Collins has expressed concern that many taxpayers, particularly from low- and moderate-income backgrounds who may lack professional tax assistance, might miss the opportunity for refunds that could significantly impact their financial situations.
Eligibility for these refunds extends to individuals who incurred certain penalties and interest imposed by the I.R.S. from January 20, 2020, through July 10, 2023. This includes penalties for late filings, unpaid taxes, and failure to make estimated tax payments.
The refunds follow legal precedent established in the case of Kwong v. United States, where the U.S. Court of Federal Claims found that due to a law effective early in the pandemic, tax filing and payment deadlines should have been automatically extended throughout the disaster declaration period. This declaration extended from early 2020 until May 11, 2023, plus an additional 60 days, resulting in a tax-related deadline of July 10, 2023. Under typical I.R.S. guidelines, taxpayers can claim refunds for up to three years post-filing, moving the ultimate deadline for potential claims to July 10, 2026.
The ruling indicated that the I.R.S. should not have levied penalties for late filings or payments during this extended period, which covers a substantial duration, reinforced by Judge Molly R. Silfen’s comments that this pandemic represented an “unprecedented and long-lasting” national event.
Tax policy experts note that law governing automatic deadline extensions was recently revised, and the current standard allows for a maximum extension of 120 days following a federally declared disaster.
For those wondering when they might receive potential refunds, Ms. Collins warns that payments will not be issued quickly. The federal government is likely to contest the court’s decision, meaning resolution may take considerable time, and refunds may not be issued if the government prevails. Kenneth Kies from the Treasury Department has stated that they believe the court made an error in its ruling and intend to defend the statutory language as written.
Taxpayers are advised to review their federal income tax transcripts to determine if they might be affected. These transcripts detail paid taxes along with any penalties and interests applied. Establishing an individual I.R.S. account is the most efficient method to access these transcripts, requiring verification of identity through a government ID and possibly a selfie, or a video call with an agent. For those who prefer, transcripts can be requested via mail.
If a taxpayer identifies penalties or interest from the COVID-19 period, they can submit I.R.S. Form 843, titled “Claim for Refund and Request for Abatement,” by the deadline. Although the status of the court action remains unresolved, taxpayers can file what is known as a “protective claim” to safeguard their rights. This can be noted on the form by including language such as “Protective Refund Claim Pursuant to Kwong Case.”
Tax professionals emphasize that while the instructions for Form 843 are relatively simple, those who faced significant amounts of penalties or had complex tax situations should consider consulting with a tax specialist to ensure their claims are properly filed in light of the evolving legal landscape.
It’s important to note that the form must be submitted via mail rather than electronically. Taxpayers should use certified mail to retain proof of submission. Ms. Collins has called on the I.R.S. to provide an electronic filing option to manage the anticipated influx of paper applications, though it remains uncertain if this will take place.
Finally, Ms. Collins cautions taxpayers to be vigilant against potential scams related to pandemic-era refunds, urging individuals to be wary of unsolicited tax advice or offers promising quick refunds or guaranteed eligibility.
