Act Now: Don’t Miss COVID‑Era IRS Refunds
Recent court decisions have created a potentially valuable, but time-limited, opportunity for some taxpayers to seek refunds or abatements of certain IRS penalties and interest connected to the COVID-19 federal disaster period, January 20, 2020 to July 10, 2023. During this period, tax deadlines were effectively postponed, meaning certain penalties and related interest should not have been imposed. While the IRS is still appealing the findings – meaning the issue is not yet settled – July 10, 2026 is considered the deadline for filing protective claims. While a protective claim does not guarantee a refund, it effectively holds your place in line until the issue is settled.
The opportunity stems from two taxpayer-favorable decisions: Abdo v. Commissioner and Kwong v. United States. Those cases interpret IRC §7508A as providing a mandatory postponement period during the COVID-19 disaster, running from January 20, 2020 through May 11, 2023, plus the statute’s additional 60 days, resulting in an effective postponement period through July 10, 2023.
Under this reasoning, tax obligations with filing or payment deadlines inside that window were not legally late until after the postponement period ended, so certain penalties and interest that the IRS assessed during that time may have been computed incorrectly. Depending on the facts, this may affect failure-to-file penalties, failure-to-pay penalties, estimated tax penalties, and related interest for multiple tax periods, including earlier tax years. Since the matter isn’t yet settled, it’s possible that IRS would concede the issue but limit relief to certain penalty types and/or tax periods.
Why a protective claim matters
A protective claim is filed to preserve a taxpayer’s rights while the law is still developing. It does not guarantee that the IRS will allow the refund, and some claims may be denied, delayed, or require additional administrative or judicial action.
Filing nothing, however, can be the most expensive option. If the applicable refund or abatement deadline passes before a claim is filed, the taxpayer may lose the ability to recover these amounts even if later guidance or court decisions allow broader relief. That is why taxpayers who may be affected should act promptly rather than waiting for the issue to become more settled.
For many taxpayers, the practical deadline is July 10, 2026. Even though that date may sound manageable, evaluating eligibility is not a last-minute exercise because it usually requires reviewing IRS account transcripts, identifying affected years, analyzing assessment and payment dates, and determining whether a refund claim, abatement request, or both should be filed.
In addition, protective claims should be drafted carefully so they identify the relevant tax periods, the penalties or interest at issue, the period from January 20, 2020 through July 10, 2023 during which the charges may have been improper, and the legal contingency being preserved. Waiting until the last minute increases the risk of incomplete filings, missed periods, or avoidable processing problems.
DBMCPA can assist clients by reviewing IRS transcripts and account history to identify whether penalties or interest may have been affected by the COVID-era postponement rules described in Abdo and Kwong. Where appropriate, DBMCPA can prepare and file protective refund or abatement claims, including Form 843 filings, to preserve the client’s rights before the deadline expires. Because each taxpayer’s facts are different, eligibility should be evaluated individually. Clients who believe they may have had IRS penalties or interest assessed during the period from January 20, 2020 through July 10, 2023 should contact DBMCPA as soon as possible so there is enough time to analyze the account and prepare any necessary protective claim before July 10, 2026.
