IRS may owe you a refund for coronavirus-era fines. Here's how to apply
Tens of millions of taxpayers who were penalized by the IRS during the coronavirus pandemic for failing to pay their taxes or filing late may qualify for a refund or termination of the penalties they incurred during that period.
However, the relief is not automatic or guaranteed, and most taxpayers need to file a claim for a refund or abatement of their tax liability by July 10 to get their money back.
The national taxpayer advocate, an independent watchdog of the IRS, is warning that the deadline to apply for relief is fast approaching after a federal court late last year ruled that taxpayers were not required to file their taxes on time during COVID-19.
The IRS had assessed more than 120 million penalties against tens of millions of taxpayers for filing late returns, failing to pay taxes or failing to make required estimated tax payments between January 2020 and July 11, 2023.
The case, called Kwong v. U.S., decided that COVID-19 emergency laws extended the deadline to file and that the IRS owes penalty payments to taxpayers. The case is still being litigated.
The taxpayer advocate calls the issue “widespread and not limited to a small or specialized group of taxpayers.”
Ken Kies, assistant secretary at the Treasury Department, told The Associated Press that President Donald Trump’s Republican administration believes that Kwong “was wrongly decided because it is a misreading of the plain language of the statute.”
“We will continue to defend the statutory language as written,” he said in a statement.
Still, as it currently stands, taxpayers should fill out a form to preserve their rights, said Alyssa Maloof Whatley, a director at Frost Law, a tax firm with locations across the U.S.
“Either it holds up or it doesn’t,” she noted of the ruling. ”So by preserving your claim, you’re actually preserving your right to that money.”
How to apply
People eligible for a potential refund or abatement are those who filed a tax return late between Jan. 20, 2020, and July 11, 2023; paid penalties for filing or paying late during that period; owed IRS penalties even if they have not paid them; or filed an international information return late.
In a series of blog posts on its website, the taxpayer advocate is sharing recommendations — including that people review their IRS tax account transcripts through their online account — to check penalty assessments from those periods.
Who’s affected
“Many taxpayers affected by this issue have low and moderate incomes,” the taxpayer advocate said. “These taxpayers are less likely to have professional representation and to learn about complex legal developments like this one. As a result, they face a greater risk of missing the opportunity to claim refunds to which they may be entitled.”
Maloof Whatley said people will need to fill out Form 843, which can be found on the IRS website, and send it through snail mail.
According to the IRS, for people who received a penalty during the pandemic, the form must be mailed to the service center where they would be required to file a current year tax return.
Because of the impending July 10 deadline, “taxpayers should not delay reviewing their situation and considering potential claims for refund and abatement,” the taxpayer advocate said.
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