Tens of millions of taxpayers may still be eligible to claim large tax refunds thanks to a recent court decision but need to file soon, according to National Taxpayer Advocate Erin Collins.
The decision last November in the case of
Collins observed that for COVID-19, a federal disaster declaration was in effect from Jan. 20, 2020, through May 11, 2023. Then, 60 more days extended the period to July 10, 2023, for tax purposes.
"Based on the court's reasoning in Kwong, filing and payment deadlines were postponed during that entire period, and as a result, tax returns and payments due anytime within that window were not late until after July 10, 2023," Collins wrote. "By the court's logic, the IRS should not have assessed penalties for late filing or payment during that 3.5-year period, nor charged interest on those amounts."
She pointed out that the government's pleadings interpreted the postponement statute more narrowly and disagreed with the position that the statute suspended filing and payment obligations for 3.5 years. Collins anticipates the Justice Department will appeal the decision.
However, she noted that the Kwong opinion is explicit in saying: "The plain meaning of that statute is that the automatic extension runs from the beginning of the disaster declaration, through the end of the declared disaster period, and until 60 days after the end of the declared disaster period."
Collins believes it may take several years until the issue is finally resolved by the courts.
She urged taxpayers to file claims for refund before July 10. "Tens of millions of taxpayers may be entitled to refunds or abatements of penalties and interest that the IRS assessed during the nearly 3.5-year COVID-19 federal disaster period. However, this relief will not happen automatically," Collins wrote. "To protect their rights, most taxpayers must file a claim for refund — generally by July 10, 2026."
"This situation highlights a core concern I have raised repeatedly," Collins added. "When relief exists but is difficult to access, taxpayers — especially those without representation — are at risk of losing benefits. That outcome undermines fundamental taxpayer rights, including the rights to be informed, pay no more than the correct amount of tax, and to a fair and just tax system."
Collins noted that under the reasoning of the Kwong decision, taxpayers may be entitled to a refund or abatement of certain amounts assessed during the COVID period, including:
- Penalties assessed for failure to timely file 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; and
- Overpayment interest for the 2020–2023 disaster period.
"Some practitioners believe that even where the underlying liability arose before the disaster period began, you may not have had to pay interest or penalties during that period," she added. "Again, the IRS disagrees."
She pointed to an example in Treas. Reg. Section 301.7508A-1(f), which says a taxpayer already delinquent before Jan. 20, 2020, does not receive a windfall elimination of pre-disaster penalties and interest. "But the regulation will not control the outcome if a court determines the statutory language provided for suspension of all timing penalties and interest accruals, and the Kwong opinion did not address pre-disaster delinquencies," said Collins.
The bottom line is that taxpayers may be entitled to a refund or reduction of assessed penalties and interest.
"For taxpayers dealing with financial pressures, these amounts can make a real difference," Collins wrote. "But most taxpayers must act by July 10, 2026, to request their potential refunds."
