If you paid a late-payment penalty on your 2020 or 2021 federal tax return, the IRS may owe you that money back. But you have until July 10, 2026, to ask for it. After that, your right to a refund disappears for good.
In late 2023, the IRS announced it was wiping failure-to-pay penalties from roughly 4.7 million tax returns covering the 2020 and 2021 tax years. The relief, formalized under IRS Notice 2024-7, applied automatically to taxpayers who still carried those penalty balances on their accounts. But anyone who had already paid the penalty before the waiver took effect got nothing. Those taxpayers have to file a claim on their own, and the deadline to do so is now less than two months away.
Why These Penalties Were Waived
A failure-to-pay penalty is what the IRS charges when you file a return but don’t pay the full balance by the due date. The rate is typically 0.5% of the unpaid tax for each month the balance remains outstanding, and it can stack up to 25% of the total amount owed.
The COVID-19 national emergency declaration, which ran from January 20, 2020, through May 11, 2023, according to the National Taxpayer Advocate, gave the IRS authority to grant broad penalty relief. The agency used that authority to remove failure-to-pay penalties on 2020 and 2021 returns where the assessed tax balance was $100,000 or less per year, recognizing that millions of Americans fell behind on taxes through no fault of their own during the crisis.
For taxpayers whose penalties were still on the books, the fix was automatic. But the IRS also acknowledged that people who had already paid those penalties could be entitled to refunds or credits. The catch: the agency won’t go back and revisit those payments on its own. You have to ask.
The July 10 Deadline and Why It Exists
The July 10, 2026, cutoff traces back to the general three-year statute of limitations on refund claims under Internal Revenue Code Section 6511. Because the IRS extended certain filing and payment deadlines during the disaster period, the refund window for qualifying 2020 and 2021 penalties lands on this specific date. Once it passes, the IRS is no longer legally required to honor refund requests for these penalties, even if you clearly qualified.
How to File for Your Refund
The form you need is IRS Form 843, Claim for Refund and Request for Abatement, available for download on IRS.gov. On it, you’ll identify the tax year, the type of penalty you paid, the amount, and the basis for your claim. In this case, the basis is the administrative waiver the IRS applied to failure-to-pay penalties during the COVID-19 disaster period under Notice 2024-7.
The National Taxpayer Advocate has urged eligible filers to submit what’s called a “protective” refund claim before the deadline. A protective claim works as a placeholder: it locks in your right to a refund before the statute of limitations expires, even if you’re still pulling together documentation or exact figures. Once the claim is on file, the IRS can process it on its own timeline without your eligibility evaporating because the window closed.
One important note: if you paid interest on top of the penalty, that interest is generally refundable as well. The IRS is required under IRC Section 6611 to pay interest on overpayments, so your refund could be larger than just the penalty amount itself.
This relief applies only to federal income tax penalties. State tax penalties are handled separately by each state’s tax authority and are not covered by the IRS waiver.
Who Should Check Their Records
If any of the following apply to you, it’s worth pulling your IRS account transcripts or prior returns before July 10:
- You filed a 2020 or 2021 federal tax return with a balance due and paid a failure-to-pay penalty during or after the pandemic years.
- You set up an installment agreement with the IRS for those tax years and penalty charges were included in your payments. Note that if you paid through an installment agreement, identifying which portions of your payments went toward penalties versus tax and interest can be more difficult; your account transcript will itemize these amounts by transaction code.
- Your assessed tax balance for the relevant year was $100,000 or less (the threshold for this specific waiver).
A word of caution for self-employed individuals, gig workers, and freelancers: this waiver covers failure-to-pay penalties (assessed under IRC Section 6651) specifically. It does not cover estimated tax penalties (assessed under IRC Section 6654), which are the penalties charged when you underpay quarterly estimated taxes. Those are different charges under different sections of the tax code. If you owe penalties related to missed or insufficient estimated tax payments for 2020 or 2021, those are not eligible for refund under this waiver. If you’re unsure which type of penalty you paid, your account transcript will break it down by transaction code.
The IRS has not published a breakdown of how much penalty money was collected during the disaster period that would now qualify for refund, nor has it released data on how many taxpayers still need to file claims. The roughly 4.7 million returns that received automatic relief represent only the cases the agency caught on its own. The number of people who paid before the waiver took effect and now need to act remains unknown.
What to Expect After Filing
There is no published timeline for how quickly the IRS processes Form 843 claims tied to this specific waiver. The agency has not committed to resolving all claims by a set date, and taxpayers who file close to the deadline should be prepared to wait. The IRS Internal Revenue Manual outlines procedures for handling administrative waivers and abatements, but no public audit shows how consistently front-line staff are applying the COVID-era relief rules across individual cases.
Collection notices that had been paused during the pandemic resumed in 2024, a clear signal that the IRS considers the emergency relief chapter closed. That makes the July 10 deadline all the more important: once it passes, taxpayers who haven’t filed a claim generally lose the legal right to recover penalties they already paid, regardless of whether they would have qualified.
Why Filing Before July 10 Could Put Money Back in Your Pocket
The math here is simple. Filing Form 843 costs nothing. If your claim is approved, you get money back. If it turns out you don’t qualify, you’ve lost only the time it took to fill out the form. But if you miss the July 10, 2026, deadline, the door closes permanently.
To put the stakes in perspective: a taxpayer who owed $10,000 on a 2020 return and let the balance sit for 18 months before paying could have racked up a failure-to-pay penalty of $900 or more, not counting interest. For someone who owed closer to the $100,000 threshold, the penalty could run into the thousands.
For anyone unsure whether they paid qualifying penalties, the fastest way to check is to request an account transcript from the IRS online at IRS.gov/Get-Transcript or by calling the IRS at 1-800-829-1040. A tax professional or enrolled agent can also review your records and help determine whether a claim makes sense. If you used a tax preparer during those years, they may already have copies of your returns and payment records on file.
The IRS will not chase you down to return this money. If you think you’re owed, the next 56 days are your window to find out.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
