Summary (tl;dr)

Millions of U.S. taxpayers may be eligible for refunds of penalties and interest charged by the IRS during the COVID-19 pandemic, either automatically due to an IRS waiver for 2020-2021 taxes or by filing a claim based on a recent federal court ruling that extended tax deadlines.

Essential Background

During the COVID-19 pandemic, the Internal Revenue Service (IRS) suspended certain automated collection notices starting in February 2022 to alleviate taxpayer burden and address agency backlogs. While these notices were paused, penalties for failure to pay continued to accrue for many taxpayers, often without their knowledge due to the lack of reminder notices. Additionally, the federal government declared a public health emergency in response to the pandemic, which lasted from January 20, 2020, to May 11, 2023.

The Full Story

These keywords are trending due to two key developments regarding pandemic-era tax relief. Firstly, in December 2023, the IRS announced automatic penalty relief for eligible individuals, businesses, and tax-exempt organizations that incurred failure-to-pay penalties for the 2020 and 2021 tax years. This relief applies to taxpayers with assessed income tax under $100,000 who received an initial balance due notice between February 5, 2022, and December 7, 2023. Approximately $1 billion in relief was provided automatically to 4.7 million taxpayers.

Secondly, and more recently, a federal court ruling in the Kwong v. United States case (2025) broadened the interpretation of disaster-related tax deadline postponements under Section 7508A(d) of the tax code. This ruling determined that the COVID-19 public health emergency qualified as a federally declared disaster, effectively extending many tax deadlines through July 11, 2023. This implies that penalties and interest assessed by the IRS between January 20, 2020, and July 10, 2023, may have been improperly charged. Taxpayers who paid these penalties or interest could now be eligible for refunds, but they must proactively file a claim using IRS Form 843 by a critical deadline of July 10, 2026.

Why It Matters

This trend is significant because it highlights a substantial opportunity for millions of American taxpayers, including individuals and businesses, to potentially recover money they paid in penalties and interest during the pandemic. While the IRS provided some automatic relief, the court ruling opens a new avenue for refunds that requires taxpayer action before the July 10, 2026, deadline. Missing this deadline could mean forfeiting the chance to recover potentially thousands of dollars in overcharged fees. The situation underscores the ongoing financial ramifications of the pandemic and the importance for taxpayers to review their tax records and understand their eligibility for these refunds.

Geographic Location

• United States (nationwide impact on taxpayers and federal tax policy)