Tens of millions of Americans may not realize they could be owed an IRS refund from the COVID-19 era, so the independent National Taxpayer Advocate (NTA) is sounding the alarm: the deadline to claim it is fast approaching.
“Many taxpayers affected by this issue have low and moderate incomes,” NTA said in a blog post. “These taxpayers are less likely to have professional representation and to learn about complex legal developments like this one. As a result, they face a greater risk of missing the opportunity to claim refunds to which they may be entitled.”
Potential refunds or abatement of penalties stems from a court ruling in Kwong vs. United States interpreting a tax rule that says once a federally declared disaster is in effect, tax code Section 7508A(d) mandates postponement of applicable tax deadlines for the disaster period plus 60 days. The court ruled the COVID-19 public health emergency from Jan. 20, 2020, through May 11, 2023, fell under this provision. Add in 60 days, and the new tax deadline for tax year 2019, 2020, 2021 and 2022 filings would have been July 10, 2023.
Without taxes due, the IRS likely also had no right to levy penalties and interest during that window, tax lawyers said. So, if you were charged penalties or fees, you may be owed a refund.
The IRS disagrees with the ruling and the Department of Justice will probably appeal, but until then, taxpayers must make a claim to preserve their refund if it’s approved, lawyers said.
“For taxpayers dealing with financial pressures, these amounts can make a real difference,” NTA said. “But most taxpayers must act by July 10, 2026, to request their potential refunds.”
What Could Taxpayers Receive?
According to NTA, taxpayers may be owed:
- 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,” NTA said. “Again, the IRS disagrees,” and taxpayers may have to wait to get the final answer. However, to preserve the right to a potential refund, taxpayers must file a claim by July 10.
Who’s Affected?
A broad group of taxpayers may be entitled to the refund, experts said.
“Impacted taxpayers represent a broad cross-section of the public, including individuals, small businesses, large corporations, estates, and trusts,” NTA said. “The issue reaches taxpayers with obligations related to income, employment, estate, gift, and excise taxes. It may also affect taxpayers who filed late international information returns, which can result in significant penalties even when no tax is due.”
How to Find Out If You’re Owed a Refund
Taxpayers need to check their tax records to see if the IRS levied any penalties or interest during the tax filing pause, said Jon Wasser, partner at Fox Rothschild who focuses on tax issues. They can do that by either asking their tax professionals or looking at their IRS tax transcript.
IRS tax account transcripts show each year’s tax information, including filing status, taxable income and adjustments made after the original return was processed. They also show payments, penalties and interest with dates they were made or assessed.
Tax account transcripts are available online by registering to use the Individual Online Account to view, print, or download, or by mail. Americans can order one on the IRS website or by calling the automated phone transcript service at 800-908-9946. It should arrive in five to 10 calendar days.
How to File Your Claim by July 10
Tax professionals can file claims on behalf of a taxpayer, or a taxpayer may file one using a claim for refund and request for abatement form — IRS Form 843 — using information from the tax transcript, Wasser said.
A taxpayer should specify on the form that it’s a protective claim based on the Kwong v. United States decision regarding Section 7508A(d) and the COVID-19 disaster period, lawyers said.
“You’re basically telling the IRS, ‘here’s a refund claim, put it on hold for now,’” until the case has a final determination, Wasser said. If the IRS must ultimately issue refunds after all litigation concludes, you would have preserved your right to claim yours.
NTA notes the claims currently can only be filed by paper, which “is slower, less accessible, and more difficult to track. The IRS does not provide immediate confirmation it has received the claim. As a result, taxpayers are well advised to send their refund claims by certified mail so they can prove they timely submitted them in the event they are lost or misplaced.”
NTA also requests the IRS publicize the refund potential, give taxpayers an additional six-month extension to file refund claims, and consider providing relief systemically to all eligible taxpayers so that individuals don’t have to file claims at all.
Read the full article here
