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The IRS’ taxpayer advocate issued a notice that tens of millions of American taxpayers may be entitled to refunds or reduced penalties and interest due to the postponement of filing deadlines during the COVID-19 emergency declaration.
The National Taxpayer Advocate said in a post on Thursday that refunds or abatements may be available to tens of millions of taxpayers for penalties and interest that were assessed by the IRS during the 3.5-year COVID disaster declaration period.
It explained that the issue has arisen due to recent court decisions, including a ruling in what’s known as the Kwong case that the tax code’s handling of federal disaster declarations meant that filing and payment deadlines were postponed throughout the period from Jan. 20, 2020, through May 11, 2023.
The taxpayer advocate noted that the Justice Department may appeal the decision, but the relief compelled by the ruling isn’t automatic and affected taxpayers must file their refund claims by July 10, 2026.
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Tens of millions of taxpayers may be owed refunds or lower abatement due to the court ruling, but they face a summer filing deadline to receive them. (iStock)
“Because of the infrequency of a disaster lasting this long, most taxpayers, even most tax professionals, did not foresee that filing deadlines and payments deadlines would be postponed for this long and that return filings and payments would not be considered late and therefore not subject to penalties and interest. But that is the logical extension of what the court ruled,” the National Taxpayer Advocate wrote.
They went on to warn that barring further action by the IRS or Congress to make sure that all taxpayers impacted by the ruling get what they’re owed, such taxpayers face a fast-approaching deadline to file their claims.
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Taxpayers will need to submit claims by a paper form ahead of the deadline, barring changes to the IRS’ process. (Jordan Vonderhaar/Bloomberg via Getty Images)
“Unless the IRS or Congress acts to ensure all affected taxpayers will receive refunds if the Kwong decision is upheld, taxpayers seeking refunds for penalties and interest they paid relating to that period will, in most cases, need to file claims by July 10, 2026,” the advocate explained.
“At the risk of repetition, my overriding goal is to get the word out to as many taxpayers as possible and to avoid disparate results between the ‘well advised’ and the unaware,'” they said.
The taxpayer advocate said that affected taxpayers may be entitled to a refund or abatement of amounts assessed during the COVID period for:
Penalties assessed for failure to file timely returns, failure to pay taxes, or failure to make estimated tax payments;Interest that began accruing earlier than it should have, or not at all; andOverpayment interest for the 2020-2023 disaster period.
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The COVID emergency declaration delayed filing and payment deadlines, according to a recent court ruling. (Tom Williams/CQ-Roll Call, Inc via Getty Images)
The notice cautioned that the IRS requires claims under Form 843 to be filed through paper submissions, and because such filings may not provide an immediate confirmation of receipt, it advised that taxpayers should send claims by certified mail to have evidence of their timely submission in case the forms are lost.
The taxpayer advocate recommended that the IRS should abide by the Taxpayer Bill of Rights and take four steps, including publicizing the issue for taxpayers, providing a six-month filing extension for refund claims, consider providing systemic relief so taxpayers don’t have to file, and to create an electronic submission portal.
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It also urged tax professionals to inform clients about the issue, members of Congress to highlight the issue in communications with constituents, and for the media to report about it for the public’s knowledge.
