Taxpayers Eligible for COVID-19 IRS Penalty Refunds

Millions of American taxpayers may be eligible to recover penalties and interest paid to the Internal Revenue Service during the COVID-19 pandemic, following recent court rulings that extended federal tax deadlines amid the public health crisis. The opportunity applies to payments made from January 2020 through July 2023, with claims needing to be filed by July 10, 2026, to preserve eligibility under the statute of limitations.

The rulings stem from interpretations of Section 7508A(d) of the Internal Revenue Code, which postpones tax deadlines during federally declared disasters for the duration of the event plus an additional 60 days. Courts, including the U.S. Court of Federal Claims, have determined that the COVID-19 emergency qualified as such a disaster from January 20, 2020, to May 11, 2023. Adding the 60-day grace period pushes the effective deadline for 2019 through 2022 tax years to July 10, 2023. As a result, the IRS lacked authority to impose certain penalties or interest before that date, according to tax experts and legal analyses.

Eligible penalties include those for late filing, at 5 percent of the unpaid taxes; late payment, at 0.5 percent per month up to 25...