In hopefully the last thing we will have to deal with from the COVID-19 years, a court has handed down a ruling about taxpayers being able to apply for a refund from the penalties that they had to pay for filing their taxes late.
The court determined that the COVID-19 pandemic qualified as a nationwide disaster beginning January 20, 2020. Under IRC § 7508A, as in effect before 2021, tax deadlines were automatically postponed until July 10, 2023 (60 days after the disaster period ended on May 11, 2023).
This means that filing, payment, and related deadlines for multiple tax years were extended. Therefore, the court found that the taxpayer’s refund claims were timely, even though they had previously been considered late.
Based on this court decision, taxpayers generally now have until July 10, 2026, to file a refund claim under the applicable statute of limitations. Filing by this date preserves the ability to seek a refund - but does not ensure that a refund will be issued.
The IRS has indicated that it intends to appeal the court’s decision. As a result, taxpayers who file timely claims and otherwise qualify may not receive refunds until the appeal process is resolved.
So who might this ruling apply to?
For tax years 2019 through 2022, certain penalties and interest assessed during the COVID-19 period may have been applied even though the returns and payments for these years awere treated as timely if completed by July 10, 2023.
These penalties may include:
• Failure-to-file penalties
• Failure-to-pay penalties
• Estimated tax penalties
• Underpayment interest
If you had to pay one of these penalties, there are two type of claims you can make: Protective claim or Refund claim.
Protective claims
A protective claim preserves the right to a refund when entitlement depends on a future event. The IRS recognizes that these claims may involve situations where the amount or eligibility is not fully determined. Therefore, taxpayers are not required to specify an exact amount but must clearly explain the basis for the claim.
Refund claims
A refund claim is filed when the amount and entitlement are established and must include supporting documentation. For penalties and interest, taxpayers typically use Form 843. Each Form 843 applies to a single tax year, so separate forms must be filed for each affected year.
If you want to file a claim:
You should submit Form 843 (for either a protective or refund claim) to the IRS service center where they would normally mail their Form 1040 (use the address for returns filed without payment). You can find this address on the IRS.gov website if you file electronically and don't know it.
To confirm delivery, taxpayers should use certified mail or an approved private delivery service and keep proof of submission. (Form 843 is not currently available for e-filing.) When completing Form 843, taxpayers should clearly state the legal basis for the claim (the Kwong decision) and, if applicable, explain that the claim is protective and contingent on the outcome of the IRS appeal.
Remember that taxpayers have until July 10, 2026, to file a refund claim under the applicable statute of limitations. Filing by this date preserves the ability to seek a refund but does not ensure that a refund will be issued. Claims filed after this date are expected to be barred.