The clock is ticking for tens of millions of Americans who may be entitled to substantial IRS refunds or penalty waivers tied to the COVID-19 pandemic. The Taxpayer Advocate Service, an independent watchdog within the IRS, issued a stark warning last week: a pair of recent court rulings have opened the door to significant financial relief, but taxpayers have roughly two months to act.
National Taxpayer Advocate Erin M. Collins highlighted what she called a “major refund opportunity” stemming from judicial decisions that effectively nullified certain penalties assessed during the federal COVID disaster period. That period stretched from January 2020 through May 2023, with an additional 60 days tacked on for tax purposes, pushing the effective end date to July 10, 2023.
In a blog post, Collins explained that the logic of one court decision suggests the IRS “should not have assessed penalties for late filing or payment” for any returns or payments due during that three-and-a-half-year window. The ruling, she argued, means the agency must now revisit millions of penalty assessments that were levied while the disaster declaration was in effect.
The potential implications are enormous. According to Collins, the decision could affect tens of millions of taxpayers who were hit with late-filing or late-payment penalties between 2020 and mid-2023. For many, the refunds or abatements could be substantial, especially for those who paid high penalties on large tax bills.
The Taxpayer Advocate Service is urging taxpayers to review their IRS notices and payment records from that period. Those who believe they were improperly penalized should file for relief before the July 10 deadline. Collins emphasized that the window is narrow and that the IRS has not yet issued broad guidance on how to claim the refunds.
The development comes amid a broader political backdrop of fiscal and regulatory battles. Meanwhile, the IRS is also preparing to issue first refunds for nullified Trump tariffs, another major taxpayer relief effort. And with the Federal Reserve holding rates steady as a new nominee nears confirmation, the economic landscape remains unsettled.
For taxpayers, the message is clear: don’t wait. The July 10 cutoff is hard and fast, and missing it could mean forfeiting hundreds or even thousands of dollars. Collins advised anyone who received a penalty notice during the COVID disaster period to consult a tax professional or use the IRS’s online tools to check eligibility.
The Taxpayer Advocate Service has also set up a dedicated page with instructions on how to file for penalty abatement. With the clock running, the agency is urging swift action to avoid losing out on what could be a once-in-a-generation refund opportunity.
