A Closing Window: COVID-Era Tax Penalty and Interest Refund Claims

What individuals and small business owners should know before the deadline runs out

If the IRS charged you late-filing or late-payment penalties or interest on a tax bill during the pandemic, you may have a narrow window to file a claim asking the IRS to provide a refund. That window is closing, and for many taxpayers it closes sooner than they expect.

The key date: For most pandemic-era claims, the deadline is on or about July 10, 2026. But some taxpayers have an earlier personal deadline, depending on when a payment was made. It is better to act sooner rather than later.

What to know

Federal law tells the IRS to set aside certain deadlines for taxpayers affected by a federally declared disaster. The COVID-19 emergency was treated as exactly that kind of disaster, covering all fifty states. The practical question that courts and the IRS have been wrestling with is how long that period where deadlines were set-aside lasted, and what it means for penalties and interest that piled up during it.

Recent court decisions in Kwong v. United States and Abdo v. Commissioner have given taxpayers a reasonable, good-faith argument that some penalties and interest charged during the pandemic should not have accrued. Filing a claim now is how you preserve the right to make that argument later. Miss the filing deadline and the opportunity for a refund is gone, no matter how strong the argument might have been.

An honest word about your odds

The IRS has formally announced that it will accept only a small portion of these claims at the administrative level. For anything beyond that, the IRS position today is that it will deny the claim, and recovering the larger amount would require going to federal court.

That does not make filing pointless. Filing is what keeps the door open. It preserves both the modest amount the IRS may grant now, and the larger amount a court might allow later. Keep in mind a full refund is not guaranteed, and this is not “free money.” The IRS is currently appealing the Kwong decision.

Who should pay attention

Look into this if you are an individual or business with a tax year touched by the pandemic where any of the following apply to you:

• You were charged a late-filing or late-payment penalty by the IRS.

• You paid interest on a balance owed to the IRS.

• You received a refund but were not paid the interest the IRS owed you on it.

• You are a small business that filed or paid late and absorbed penalties as a result.

One important limit: This relief is only aimed at charges that accrued during the disaster period, not for debts you already owed going in.

Why the timing is tricky

There is a deadline of July 10, 2026 for many claims. Layered underneath it is the general rule that you have only two years from the date of payment to request a refund. For some people that two-year clock runs out before July 2026. For example, for a handful of early-2024 payments, it already has. This is why most people should check now, rather than waiting until the deadline.

What to do

If any of this sounds like it might apply to you, then you should:

• Pull your records. Locate the tax years where you were charged penalties or interest, and note any payment dates.

• Get your deadline checked. Your personal deadline may be earlier than July 10, 2026.

• Decide whether to file a protective claim. Filing preserves your rights even if you are undecided about pursuing the matter further.

Goldberg Tax Law can help. We can review the relevant tax years, confirm your specific deadline, and prepare a properly documented claim. Because the window is short and some deadlines have already closed, the most useful thing we can do is tell you quickly whether you still have time. Contact us to arrange a review. You may also call (917)-746-2211.

This article is general information, not legal or tax advice, and does not create an attorney-client relationship. Whether a claim is available, and how much it may be worth, depends on your specific facts. Deadlines are firm; if you think you may be affected, do not wait.