COVID-Era IRS Penalty Refund Claims
What Taxpayers Should Know Now
Recent court decisions have raised important questions about whether certain IRS penalties and interest assessed during the COVID-19 emergency were legally imposed.
Although the deadline for filing protective refund claims has now passed, the litigation continues and could ultimately affect taxpayers who paid penalties during that period.
Understanding these cases may help you determine whether any future refund opportunities could apply to your situation.
Why This Matters
Recent court decisions, including Kwong v. United States and Abdo v. Commissioner, have raised an important legal question: Did the IRS begin assessing certain IRS penalties and interest too early during the COVID-19 disaster period?
Because many federal tax deadlines were extended during the national emergency, some courts have suggested that certain late-filing, late-payment, and estimated tax penalties may have been assessed prematurely.
If that interpretation is ultimately upheld, some taxpayers could become entitled to refunds.
Protective Refund Claims
Many taxpayers filed protective refund claims before the July 10, 2026 deadline to preserve their legal rights while the litigation continues. Filing a protective claim does not guarantee a refund; it simply preserves the taxpayer's ability to seek one later if the courts ultimately rule in taxpayers' favor.
What Happens Next?
The government has appealed the Kwong decision, so the litigation continues. The courts could uphold the taxpayer-friendly rulings, narrow them, or ultimately rule in favor of the government. Until the cases are resolved, the IRS is not issuing automatic refunds based on these decisions.
What If You Missed the Deadline?
If you did not file a protective claim, your options may be more limited. However, every taxpayer's circumstances are different.
Reviewing your IRS account transcripts and discussing your situation with a qualified tax professional may identify whether any other refund opportunities or exceptions remain available.
Our Recommendation
The COVID-era penalty litigation is still evolving, and future court decisions or IRS guidance could change the landscape.
If you paid significant IRS penalties during the COVID emergency period, GurelCPA can help review your situation and determine whether any opportunities may still exist.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.