Court Ruling Allows Pandemic Tax Refund Claims Until 2026

A recent court ruling has opened the door for millions of taxpayers in the United States to claim refunds from the Internal Revenue Service (IRS) for penalties and interest imposed during the COVID-19 pandemic. This decision allows claims to be filed until a legal deadline of July 10, 2026, potentially impacting individuals and businesses alike.

The ruling pertains to the federal government’s handling of tax deadlines during the pandemic. Under 26 US Code Section 7508A(d), tax deadlines must be extended in the event of a federally declared disaster. The COVID-19 public health emergency, which lasted from January 20, 2020, to May 11, 2023, qualifies as such a disaster. Adding an additional 60 days to this period effectively extends tax deadlines for filings related to the 2019 through 2022 tax years to July 10, 2023.

Tax attorneys suggest that this interpretation means penalties and interest charged during the pandemic may not have been valid, paving the way for significant refunds. According to tax attorney Jon Wasser from Fox Rothschild, millions of taxpayers could be eligible for refunds if they incurred penalties or interest during the pandemic. This includes both individuals and businesses that faced financial challenges during this time.

Businesses, in particular, may lead the charge in seeking refunds, especially those that faced cash-flow disruptions during lockdowns and accrued failure-to-pay penalties. Wasser emphasized the importance of acting quickly, warning that failing to file a claim before the legal deadline could result in the loss of the opportunity to recover funds.

A notable case that illustrates the potential impact of this ruling involves Western Digital, a data-storage giant. The company has filed a lawsuit seeking a refund of part of the $53.6 million it paid in taxes, contesting about $21 million in interest charged during the pandemic pause. The outcome of this case may influence how broadly the court ruling applies moving forward.

While the legal intricacies may take time to resolve, taxpayers are urged not to delay. Refund claims are typically subject to a statute of limitations, allowing taxpayers to file within three years of the original filing deadline or two years after paying the tax. Given the court’s ruling, the final opportunity to preserve a claim is July 10, 2026. Missing this deadline could result in losing the chance to recover owed funds.

Tax professionals recommend that individuals and businesses begin by reviewing their IRS tax records. This can be done by examining tax account transcripts, which detail penalties, interest, and payment history for each year. Taxpayers can access these transcripts through the IRS Individual Online Account, request them via mail, or order them through the agency’s automated phone service. Typically, transcripts are received within five to ten days.

If penalties or interest were charged during the pandemic, taxpayers may use IRS Form 843 to request a refund. Legal advisors often recommend submitting a protective claim, referencing the case of Kwong v. United States and the disaster provisions in Section 7508A(d). A protective claim signals to the IRS that a refund is being sought while awaiting a final court ruling.

In summary, the recent court decision has significant implications for those who faced penalties or interest during the pandemic. With an approaching deadline of July 10, 2026, eligible taxpayers are encouraged to act swiftly to explore their options for potential refunds.