Tens of millions of Americans paid IRS penalties during the pandemic. A growing body of legal analysis suggests many of those charges were wrong, and the federal government may owe that money back. But the window to claim it is closing fast: most affected taxpayers must file a refund request by July 10, 2026, or forfeit the money for good.
The warning comes from the National Taxpayer Advocate, the IRS’s independent watchdog. According to the Advocate’s office, the IRS assessed more than 120 million penalties during the COVID-19 disaster period, affecting individual and business filers alike. Many of those penalties, the Advocate argues, should never have accrued because federal law required the IRS to suspend penalty calculations while the national emergency was in effect.
Why the IRS may have overcharged you
The legal argument centers on Section 7508A of the Internal Revenue Code. When the president declares a federal disaster, the IRS is required to disregard certain time periods when calculating filing and payment deadlines. The COVID-19 national emergency, declared in March 2020 and not terminated until April 2023, qualified.
The IRS acknowledged this obligation in Notice 2020-23, which postponed a broad set of tax deadlines to July 15, 2020, for returns, payments, and other time-sensitive actions originally due between April 1 and July 15, 2020. Subsequent IRS notices extended relief further into 2020 and 2021. The postponements applied to individual and business filers and covered obligations including income tax payments, estimated tax installments, and certain information returns.
The problem: while the IRS paused some deadlines, it continued assessing penalties on millions of accounts as though the disaster suspension did not apply. Failure-to-file penalties, failure-to-pay penalties, and estimated tax underpayment charges all kept accumulating for filers whose due dates fell within the emergency window. The National Taxpayer Advocate’s position is that those charges conflict with the plain language of the statute.
What the IRS has already done (and what it hasn’t)
The IRS did take one significant step. In late 2023, the agency announced automatic penalty relief for certain failure-to-pay penalties on 2020 and 2021 tax returns. That program applied to taxpayers with assessed balances under $100,000 who had entered into payment arrangements or met other qualifying conditions. The IRS identified affected accounts internally and issued refunds or credits without requiring individual claims.
But that program was narrow. It covered only one type of penalty, for two tax years, and only for filers who met specific balance thresholds. The broader issue raised by the National Taxpayer Advocate reaches much further: it encompasses all penalty types that accrued during the entire disaster period, regardless of the dollar amount.
Whether the IRS will eventually extend automatic relief to this larger universe of penalties is unknown. The agency has not announced plans to do so as of May 2026, and the Taxpayer Advocate has explicitly warned that waiting for automatic corrections is risky. No public data shows how many taxpayers have already filed claims, what approval rates look like, or how long processing takes.
How much could you get back?
The exact amount depends on the type and size of the penalties assessed on your account. To illustrate the potential scale, consider a common scenario: a taxpayer who filed a 2021 return three months late with a $5,000 balance owed would typically face a failure-to-file penalty of 5% per month (capped at 25%) plus a failure-to-pay penalty of 0.5% per month. Over three months, that adds up to roughly $825 in combined penalties before interest. If those penalty months fell within the disaster period and the IRS was legally required to pause the clock, the full $825 plus any associated interest could be refundable.
Taxpayers who carried larger balances or were penalized across multiple tax years could be looking at substantially higher amounts. These figures are illustrative, not guaranteed. The IRS has not published taxpayer-level breakdowns of penalty types or dollar amounts that would be refundable under this legal theory. Pulling your own IRS account transcripts is the most reliable way to determine your specific exposure.
How to file a claim before the deadline
The standard vehicle for requesting a penalty refund is IRS Form 843 (Claim for Refund and Request for Abatement). This is a standalone form that you file directly with the IRS; you do not need to file an amended tax return, and you do not need to go through the tax software or paid preparer you originally used. Taxpayers who believe they were assessed penalties during the disaster period should take these steps:
- Pull your IRS account transcripts. You can request them online through your IRS Online Account or by filing Form 4506-T. Look for penalty charges coded during the period from March 2020 through mid-2023.
- Identify the penalty types. Common codes include the failure-to-file penalty (IRC Section 6651(a)(1)), failure-to-pay penalty (IRC Section 6651(a)(2)), and estimated tax penalty (IRC Section 6654). Each may be subject to disaster-period suspension under Section 7508A.
- Complete Form 843. Cite Section 7508A and the COVID-19 national emergency as the basis for your claim. Specify the penalty amount, the tax period, and the disaster declaration that triggered the suspension.
- Mail the form to the IRS service center that handles your account. Instructions are on the form itself. Keep copies of everything you send, and consider using certified mail for proof of timely filing.
- Consider professional help. If your penalties are large, span multiple years, or involve business returns, a tax professional or enrolled agent can help ensure the claim is filed correctly and on time. That said, individual filers with straightforward situations can file Form 843 on their own.
The July 10, 2026, deadline is driven by the general three-year statute of limitations for refund claims under IRC Section 6511. Because the COVID-19 disaster-period postponement ended in mid-2023, the three-year window to claim refunds for penalties paid during that period closes on July 10, 2026. After that date, the IRS is not legally required to honor late claims, even if the underlying penalty was wrongly assessed.
What remains unresolved
Several important questions are still open. The precise boundaries of which penalties qualify under the disaster-period theory have not been fully settled through IRS guidance or court rulings. The National Taxpayer Advocate has formally recommended that the IRS provide clearer guidance and consider broader automatic relief, but the agency has not publicly responded to those recommendations.
It is also worth noting that this issue applies only to federal penalties. State tax agencies operate under their own rules, and taxpayers who paid state-level penalties during the pandemic would need to check with their state’s tax authority separately.
There is a practical tension at the heart of this situation. The IRS has already shown it can deliver large-scale automatic relief when it chooses to. Its 2023 failure-to-pay program proved the agency has the tools to identify affected accounts and reverse penalties without requiring millions of individual claims. Whether it will use those tools again for the broader disaster-period issue is a policy decision that, as of May 2026, has no public answer.
Why filing before July 10 is the safest move
The Taxpayer Advocate’s advice boils down to a simple risk calculation: the legal basis for relief is credible, the potential refund amounts are meaningful, and the deadline is firm. Filing a claim before July 10 preserves your rights regardless of what the IRS decides to do later. If the agency eventually grants automatic relief, your claim becomes redundant but costs you nothing. If it doesn’t, a timely filing is the only thing standing between you and a forfeited refund.
For the tens of millions of taxpayers who paid IRS penalties during the pandemic years, the deadline on July 10, 2026, may represent the last chance to get that money back.
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.
