Did the IRS Unfairly Penalize You During COVID? Why You Might Be Owed a Refund

The pandemic disrupted running a business and managing personal finances. For our clients in Phoenix and Mesa, navigating shifting IRS deadlines was a major source of stress. Now, a recent federal court case is reopening a critical question: Did the IRS improperly assess certain penalties and interest during the COVID era?

If the answer is yes, millions could be entitled to get that money back.

Why This Disaster Relief Ruling Matters

A recent federal court decision interpreted disaster relief rules in a way that significantly expands pandemic-related deadline relief. The tax code automatically postpones specific tax deadlines during federally declared disasters. Because the federal COVID disaster declaration lasted from January 2020 through May 2023, the court concluded that many filing and payment deadlines during that period should have been postponed much longer.

Practically speaking, penalties for late filing, late payment, and associated interest charges assessed during those years may not have been legally owed. Taxpayers who paid these amounts might qualify to recover them.

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The Hidden Trap: A Ticking Clock

For individuals and business owners, the deadline to preserve your refund rights is rapidly approaching on July 10, 2026. This date is tied to the IRS statute of limitations for filing refund claims.

The federal government is expected to appeal the court’s decision. If you wait for the legal battle to conclude before acting, your statute of limitations could expire, permanently eliminating your ability to claim a refund.

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What Is a Protective Refund Claim?

To avoid losing your rights, we often recommend filing a protective refund claim. Think of this as simply reserving your place in line. It preserves your right to a refund later if the courts uphold the expanded COVID-era deadline relief. Frustratingly, current guidance requires these claims to be submitted on paper rather than electronically.

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Who Could Be Affected?

This situation applies across multiple tax years. You may be affected if you fall into any of these categories:

  • Individuals who filed tax returns late during the pandemic
  • Self-employed taxpayers and businesses assessed late payment penalties
  • Taxpayers who entered into installment agreements after penalties accrued
  • Anyone who paid significant IRS interest charges between 2020 and 2023

Let Our AZ Tax Resolution Specialists Help

If you or your business paid IRS penalties connected to COVID-era delays, do not wait. At New Beginnings One Stop Tax Help, led by Certified Tax Resolution Specialist Vernon C Daniels Jr. and Channika Daniels, we specialize in tax debt resolution.

Contact our Phoenix or Mesa office today. We will review your situation, determine if a protective claim makes sense, and handle the paperwork for you.

Let’s Get Started!
Schedule Your Tax Appointment Now!
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