IRS Advocate: Millions Eligible for COVID Penalty Refunds by 2026

The National Taxpayer Advocate, an independent watchdog within the Internal Revenue Service, has warned that tens of millions of U.S. taxpayers may be eligible for refunds or abatements of penalties and interest assessed during the COVID-19 federal disaster period, but most must file claims by July 10, 2026.

In a notice published April 30 and updated May 1, National Taxpayer Advocate Erin M. Collins explained that recent court decisions, including a November 2025 ruling in Kwong v. United States by the U.S. Court of Federal Claims and a 2024 Tax Court decision in Abdo v. Commissioner, interpreted a tax code provision under Internal Revenue Code Section 7508A(d). This section automatically postpones filing and payment deadlines during a presidentially declared federal disaster, plus an additional 60 days.

The COVID-19 disaster declaration ran from January 20, 2020, to May 11, 2023. Adding the 60-day extension brought the relevant period to July 10, 2023, spanning nearly three and a half years. Under the courts' reasoning, tax returns and payments due within this window were not late until after that date. As a result, the IRS should not have imposed penalties for late filing,...