IRS says some COVID-era tax penalty filers may claim refunds by July 10

Tens of millions of taxpayers penalized by the IRS during the COVID-19 pandemic for late returns or late payments may qualify for refunds or abatements, the national taxpayer advocate said as a July 10 deadline approached. Relief, advocates say, is not automatic and most taxpayers need to submit a claim to preserve their rights. The reminder comes after a federal court last year ruled that COVID-19 emergency laws extended certain filing deadlines and that the government must pay back IRS penalties tied to those extended deadlines.

The issue centers on penalties the IRS assessed between January 2020 and July 11, 2023, for actions including filing late, failing to pay taxes, or failing to make required estimated tax payments, according to the national taxpayer advocate. The IRS, according to the Associated Press, had assessed more than 120 million penalties affecting tens of millions of taxpayers during that period.

The taxpayer advocate’s warning follows the federal court decision in Kwong v. U.S. late last year, which held that COVID-19 emergency laws extended the deadline to file and that the IRS owes penalty payments to taxpayers. The Associated Press reported that the case is still being litigated, and that the government continues to dispute the ruling.

Alyssa Maloof Whatley, director at Frost Law, said taxpayers should still file to protect their claim even though the case remains under challenge. Whatley told The Associated Press that “Either it holds up or it doesn’t,” and said preserving a claim is a way to preserve a taxpayer’s right to potential money.

In a statement, Ken Kies, assistant secretary at the Treasury Department, said the Trump administration believes Kwong v. U.S. “was wrongly decided because it is a misreading of the plain language of the statute.” He added that “We will continue to defend the statutory language as written,” according to the Associated Press.

The advocate said the problem is “widespread and not limited to a small or specialized group of taxpayers,” emphasizing that many affected taxpayers have low and moderate incomes and may be less likely to have professional representation. The advocate also warned that those taxpayers face a greater risk of missing the chance to claim refunds if they do not follow the legal developments.

The Associated Press reported that taxpayers eligible for potential refund or penalty abatement include those who filed late between Jan. 20, 2020, and July 11, 2023; paid penalties for filing or paying late during that period; still owe IRS penalties even if they have not paid them; or filed an international information return late. The advocate said it has posted recommendations, including reviewing IRS tax account transcripts through online accounts, to identify penalty assessments tied to those periods.

For those who plan to seek relief, the advocate said they generally must fill out Form 843, which is available on the IRS website, and mail it. The Associated Press said the form must be mailed to the IRS service center where the taxpayer would be required to file a current-year tax return, and cautioned taxpayers not to delay reviewing their situation as the July 10 deadline nears.