The Taxpayer Advocate Service (TAS) has flagged a major refund opportunity for tens of millions of Americans tied to penalties and interest assessed during the COVID-19 federal disaster period. New guidance from the independent IRS watchdog may simplify the process, but taxpayers face a tight deadline.
National Taxpayer Advocate Erin M. Collins last week highlighted the “significant refund opportunity” stemming from recent court decisions. Collins, who leads the TAS, noted that one ruling found the IRS “should not have assessed penalties for late filing or payment” during the nearly three-and-a-half-year disaster declaration that ran from January 2020 to May 2023. For tax purposes, an additional 60 days extended the period to July 10, 2023.
While the Department of Justice is expected to appeal, Collins urged eligible taxpayers to act before the deadline, now just over two months away. The TAS estimates that millions could be owed refunds or abatements, but the complexity of the process has left many unaware.
In related developments, taxpayers facing the July deadline for COVID-era refunds after court rulings should review their IRS notices carefully. Additionally, the first phase of tariff refunds opens with $127 billion eligible for importers, underscoring broader refund opportunities in the tax system.
Who Qualifies for Relief?
According to the TAS, taxpayers may qualify if the IRS assessed any of the following during the COVID disaster period:
- Penalties for failing to file returns on time
- Penalties for failing to pay taxes or make estimated tax payments
- Interest that began accruing earlier than it should have, or that was improperly calculated
- Overpayment interest for the same period
The relief applies to penalties and interest tied to the period from January 2020 through July 2023. Collins emphasized that the “major refund opportunity” stems from the IRS’s own admission that it erred in assessing certain penalties during the pandemic emergency.
How to Claim Your Refund
Taxpayers who believe they qualify should review their IRS notices from the COVID-era period. The TAS recommends filing an amended return or submitting a formal request for abatement, using IRS Form 843 or Form 1040-X. The deadline for claims is July 10, 2025, exactly two years after the extended disaster period ended.
Collins warned that the DOJ appeal could complicate matters, but she advised taxpayers to act now rather than wait for the legal process to conclude. “The window is closing,” she said in a statement.
The TAS also noted that many taxpayers may have already been refunded automatically, but millions more could still be owed. Those who paid penalties or interest during the COVID period should check their records and consult a tax professional if needed.
For context, Spirit Airlines completes refunds after collapse as political blame game intensifies, highlighting how refund processes can become entangled in broader political disputes. Meanwhile, homeownership slips away for millions as market stagnation deepens, a separate economic challenge affecting many of the same households.
The IRS has not yet issued formal guidance on the court rulings, but the TAS expects updated instructions soon. In the meantime, Collins urged taxpayers to be proactive. “Don’t wait for the IRS to reach out,” she said. “The opportunity is real, but it won’t last forever.”
