Did You Pay COVID-Era IRS Penalties? You Might Be Owed a Refund

The pandemic threw everything off balance, especially for small business owners and individuals dealing with taxes. Filing dates shifted, payments were delayed, and the IRS struggled to keep up.

Now, a recent federal court decision is reopening a question that could put money back in your pocket: Did the IRS improperly assess certain penalties and interest during the COVID years?

For many taxpayers, the answer might be yes.

What the Court Ruling Means for You

A recent federal court case took a closer look at disaster relief rules. By law, the IRS automatically postpones certain tax deadlines during federally declared disasters.

Because the federal COVID disaster declaration lasted from January 2020 through May 2023, the court decided that many filing deadlines should have been postponed much longer than initially announced.

If you paid late filing penalties, late payment penalties, or related interest charges during that window, you might not have legally owed them. You could be eligible for a refund.

Small business owner at a tea shop counter

A Quick Example

Imagine you run a local retail shop. During the chaos of 2021, your bookkeeper fell behind, and you filed your business return late. The IRS sent a notice, and you paid a hefty penalty just to make the problem go away.

Under this new ruling, that penalty might have been invalid. You could potentially claim those funds back.

Who Could Get a Refund?

This COVID tax penalty relief opportunity spans multiple tax years. It could affect you if you:

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  • Filed individual or business tax returns late between 2020 and 2023
  • Were assessed late payment penalties during the disaster period
  • Paid significant IRS interest charges during those years
  • Set up an installment agreement after these specific penalties accrued

The July 2026 Deadline

Here is where things get time-sensitive. The government will likely appeal the court's decision, which could drag out.

However, the statute of limitations to claim your refund is ticking. For many, the deadline to preserve your rights is July 10, 2026.

If you wait for the final appeal and miss this deadline, you will permanently lose your chance at a refund. This is why we help clients file a protective refund claim.

Reserving Your Spot in Line

A protective refund claim does not guarantee a check right now. It simply serves as a placeholder. It secures your right to a refund later if the courts uphold the taxpayer-friendly ruling.

The frustrating part? The IRS currently requires these claims to be filed on paper, meaning you have to physically mail the documents.

We Can Help Figure This Out

Navigating IRS notices is stressful, but you do not have to do it alone.

If you paid IRS penalties connected to pandemic-era delays, it is worth looking into now. If this sounds familiar, we can walk you through it step by step and handle the paperwork for you.

Reach out to our office to review your situation before the deadline passes.

Virtual AI
If you’re ready to get a handle on your tax situation, reach out and we’ll guide you through each step.
Let’s Sort This Out
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