Tens of millions of Americans could reclaim billions in IRS penalties and interest from the COVID era, but their deadline is just two months away.
Story Snapshot
- National Taxpayer Advocate alerts tens of millions to potential refunds for 2020-2023 penalties due to court rulings on disaster postponements.
- COVID federal disaster period (Jan. 20, 2020, to July 10, 2023) automatically tolled filing and payment deadlines.
- Taxpayers must file paper Form 843 claims by July 10, 2026; no automatic refunds from IRS.
- Affects failure-to-file (5% monthly), failure-to-pay (0.5% monthly), estimated tax penalties, and improper interest.
- Ongoing litigation, including Kwong case, drives relief; protective claims recommended now.
COVID Disaster Period Triggers Widespread Penalty Relief
The federal disaster declaration began on January 20, 2020, and ended on May 11, 2023, with an additional 60 days until July 10, 2023, for tax actions. Courts ruled this period automatically postponed deadlines under IRC §7508A.
IRS assessed penalties on filings and payments within this window as late, despite the tolling. Taxpayers faced failure-to-file penalties of 5% per month, failure-to-pay penalties of 0.5% per month, and estimated tax shortfalls. Interest accrued improperly on these balances. November 2025 decisions invalidated many assessments.
Tens of millions of American taxpayers may be entitled to refunds or reduced penalties and interest due to delayed filing deadlines during the COVID-19 emergency declaration. https://t.co/W6tnwKRwqK
— FOX6 News (@fox6now) May 2, 2026
National Taxpayer Advocate Issues Urgent Notice
The National Taxpayer Advocate released its notice on April 30, 2026, and updated it on May 1. NTA head Erin Collins highlighted that the issue affects tens of millions. Taxpayers qualify for refunds or abatements on penalties and interest from the disaster period. IRS processes claims but provides no automatic relief.
NTA urged action amid ongoing lawsuits where the Justice Department may appeal. Common sense demands that taxpayers verify old notices; government overreaching in penalties during crises offends the principles of fair play.
Taxpayers Must File Paper Form 843 Claims Proactively
Taxpayers submit Form 843 by mail to claim relief; electronic filing is unavailable. Deadline hits July 10, 2026, or three years from the return filing, whichever is earlier, or two years from the payment date.
Certified mail provides proof against IRS backlogs or lost forms. Eligible penalties cover failure to file returns, pay taxes, or make estimated payments.
Overpayment interest is also refundable for 2020-2023. Small businesses like shutdown-hit salons stand to recover significant sums. Tax pros at VENN Tax advise protective filings now.
Key Differences from Prior IRS Relief Programs
IRS Notice 2020-23 extended 2019-2020 deadlines to July 15, 2020. Notice 2022-36 automatically abated some 2019-2020 late filing penalties by September 30, 2022. This relief differs: court-driven for the full 2020-2023 period, it requires manual claims.
Precedents like Hurricane Katrina tolling and the Mann Construction case expanded interpretations. IRS Commissioner Danny Werfel oversees processing amid concerns about a backlog. Litigation continues, but the facts support the taxpayer’s claims and align with the rule of law.
Tens of millions of taxpayers may be owed IRS refunds from COVID-erahttps://t.co/yYIC1KSVbp
— Sabrina (@SabrinaNC10) May 3, 2026
Economic and Precedent-Setting Impacts Unfold
Refunds could inject billions into households facing inflation, boosting spending by low- and middle-income families. Small businesses recover 5-25% of tax liabilities plus interest.
In the long term, rulings set disaster-relief precedents, potentially forcing the IRS to automate. Tax preparation industry surges with Form 843 guidance.
Political pressure mounts if claims overwhelm; auto-relief demands echo calls for efficient government. NTA estimates the scale unverified by the IRS, yet expert John Gustafson confirms that millions qualify.
Sources:
Tens of Millions of Taxpayers May Be Owed IRS Refunds From Pandemic Era Watchdog – NTD.com
IRS Coronavirus Tax Relief and Economic Impact Payments – IRS.gov
