Recent court decisions suggest many taxpayers may recover penalties and interest the IRS charged during the COVID disaster period. The window to act is closing.

If you, your business, or your trust filed a return late or paid a tax balance late during the pandemic — and the IRS charged you penalties or interest as a result — you may be entitled to a refund or abatement of those amounts. But the opportunity comes with a firm deadline: for most affected taxpayers, a claim must be in the IRS’s hands by July 10, 2026.

We are writing to make sure our clients understand what is happening, who may be affected, and why timing matters.

What changed

During the COVID-19 pandemic, the President declared a nationwide federal disaster that ran from January 20, 2020 through May 11, 2023. A provision of the tax code, Section 7508A, automatically postpones certain federal tax deadlines for taxpayers affected by a federally declared disaster — and it does so by law, without the IRS having to issue any special notice.

Two recent court decisions have interpreted that provision in favor of taxpayers:

• Abdo v. Commissioner (U.S. Tax Court, 2024) held that this automatic postponement applies on its own and is not limited to the specific deadlines the IRS chose to extend.
• Kwong v. United States (U.S. Court of Federal Claims, 2025) held that, because the COVID disaster declaration remained in effect through May 11, 2023, the automatic postponement period extended all the way to July 10, 2023 — 60 days after the declaration closed.

The practical effect is significant. Under this reasoning, many returns and payments that the IRS treated as “late” during 2020, 2021, 2022, and into 2023 were not actually late — which means the related failure-to-file penalties, failure-to-pay penalties, and underpayment interest may have been charged improperly. The National Taxpayer Advocate has estimated that tens of millions of taxpayers could be affected.

Who may have a claim

You may want to have your situation reviewed if, for tax years roughly 2019 through 2022, you or an entity you are responsible for:

• Filed a federal return late and were charged a failure-to-file penalty;
• Paid a federal tax balance late and were charged a failure-to-pay penalty or underpayment interest;
• Were charged employment-tax or other business-related penalties during the disaster period; or
• Received any IRS penalty or interest assessment tied to a deadline that fell on or between January 20, 2020 through May 11, 2023.

This applies whether or not you still owe the IRS money. Even taxpayers who have fully paid — and who consider the matter closed — may be entitled to money back. In many cases, penalties and interest paid on a large pandemic-era balance can run into the tens of thousands of dollars.

Why the deadline matters

Relief is not automatic. The IRS is not reviewing accounts and issuing these refunds on its own. To pursue relief, a taxpayer generally must file a written claim (IRS Form 843) for each affected tax period — and for most taxpayers, that claim must be filed by July 10, 2026 if a refund is sought. A claim filed even one day late is generally lost forever, no matter how strong it is.

There is one more wrinkle. The government has appealed the Kwong decision, and the appeal is now pending before a federal appellate court. The outcome is not guaranteed. Importantly, however, the appeal does not pause the deadline. That is exactly why acting now matters: a properly filed claim preserves your rights while the law is being sorted out. Waiting to see how the appeal turns out risks letting the deadline pass before the courts have ruled.

A word of caution

Whenever a refund opportunity like this emerges, aggressive promoters follow — much as they did with the Employee Retention Credit. The National Taxpayer Advocate has already warned about marketing schemes promising “guaranteed” refunds, often charging fees based on a percentage of the refund. There are no guarantees here. These claims involve genuine legal uncertainty and require careful, individualized analysis. Be wary of anyone who tells you otherwise.

How we can help

Our tax controversy team can review your situation, determine whether you have a viable claim, calculate what may be recoverable, and prepare and file the necessary claims correctly and on time. For clients with larger or more complex exposure, we can also represent you if the IRS resists — through the appeals process and, where warranted, in refund suits against the IRS.

If you believe you may be affected — or you simply want peace of mind that you are not leaving money on the table — please contact your FRGA attorney well before the July 10, 2026 deadline so there is time to review your situation properly.