Millions of Americans who paid late-payment penalties on their 2020 or 2021 federal tax returns may be owed money by the IRS, and the deadline to claim it is barely seven weeks away.
In late 2023, the IRS announced it was waiving roughly $1 billion in failure-to-pay penalties that had accumulated during pandemic-era collection delays. The agency said it would issue refunds and credits automatically. For many taxpayers, that happened. But for many others, particularly those who had already paid the penalty before the program was announced, the money never arrived.
Now the Taxpayer Advocate Service is sounding the alarm: most affected filers must submit a formal refund claim by July 10, 2026. As of mid-May 2026, that leaves roughly 54 days to act.
Who qualifies for penalty relief
The IRS penalty waiver, formalized in Notice 2024-7, applies to taxpayers who met all three of these conditions:
- They owed federal income taxes for the 2020 or 2021 tax year.
- Their assessed balance was under $100,000 per year (per return, not combined).
- They received an initial balance-due notice, typically a CP14 or CP161 letter, between Feb. 5, 2022, and Dec. 7, 2023.
The backstory matters. During the pandemic, the IRS paused its routine collection-notice cycle for months. When the agency finally resumed mailing notices in bulk, millions of taxpayers were hit with failure-to-pay penalties on balances they may not have even known about, or had limited ability to pay, during the pause. The IRS acknowledged this was unfair and used its authority under Internal Revenue Code Section 6651 to waive the penalties across the board for qualifying accounts.
According to AP reporting and IRS figures from the time, nearly 5 million taxpayers were identified as eligible. The total relief was estimated at about $1 billion, which works out to an estimated average of roughly $200 per taxpayer, though individual amounts vary widely depending on the original balance and how long penalties accrued. Some filers are owed significantly more.
One additional note: if you previously filed an amended return for 2020 or 2021, or if you already requested penalty abatement on other grounds (such as reasonable cause or first-time abatement), you may still be eligible for relief under this program. The COVID-era waiver is a separate action from individually requested abatements. However, if the IRS already removed or refunded the specific failure-to-pay penalty at issue, there would be nothing additional to claim. Reviewing your transcript is the clearest way to determine where you stand.
Why some taxpayers still need to file a claim
The IRS committed to issuing refunds and account credits automatically. For taxpayers who still had an outstanding penalty balance when the waiver took effect, the agency generally removed the charge without requiring any paperwork.
But there is a critical gap. Taxpayers who had already paid the penalty before the relief program was announced may not have been captured by the automated process. If you wrote a check, made an online payment, or had penalty amounts collected through an installment agreement before the IRS applied the waiver, you likely need to file a formal claim to get that money back.
The IRS has not published data showing how many of the nearly 5 million eligible filers have already received relief versus how many still have unclaimed refunds. The Taxpayer Advocate Service, which operates as an independent watchdog within the IRS, has flagged this as a serious concern.
Practical realities make the problem worse. Taxpayers who moved, changed bank accounts, or stopped checking IRS correspondence years ago may have no idea the program exists. Filers who handled their own taxes without professional help are especially likely to have missed the announcement entirely.
The July 10 deadline and why it is strict
Under Internal Revenue Code Section 6511, taxpayers generally have either three years from the date a return was filed or two years from the date a tax was paid, whichever is later, to claim a refund. For a large share of filers who paid 2020 and 2021 penalties in 2023 or 2024, those limitation periods converge around mid-2026. The Taxpayer Advocate Service has identified July 10, 2026, as the outer boundary for most affected taxpayers.
This is not a soft deadline. Once it passes, the IRS is under no legal obligation to refund the penalty, even if the taxpayer clearly qualified for relief. The statutory language in IRC Section 6511 is absolute: no credit or refund shall be allowed after the limitations period expires. Missing the deadline by even a single day can forfeit a valid claim permanently.
One important caveat: individual deadlines may differ depending on exactly when a return was filed or a payment was made. Some taxpayers could face an earlier cutoff. Checking now, rather than waiting until early July, is the safest approach.
How to check your status and file a claim
The first step is to pull your IRS account transcript for tax years 2020 and 2021. You can do this online through your IRS Online Account at IRS.gov/individuals/get-transcript, or request transcripts by mail using Form 4506-T.
On the transcript, look for failure-to-pay penalty charges (transaction code 166) and then check whether a corresponding abatement, credit, or refund appears. If a penalty was assessed and paid but no relief is reflected, you likely need to file a claim.
You can also call the IRS general helpline at 1-800-829-1040 to ask about the status of penalty relief on your account. Representatives can confirm whether the COVID-era waiver has been applied and whether any refund was issued. Hold times can be long, so having your transcript in hand before calling will make the conversation more productive.
The standard form for requesting a refund is Form 843, Claim for Refund and Request for Abatement. When completing it:
- Identify the tax year (2020 or 2021) and the type of penalty (failure to pay).
- Reference the IRS’s COVID-era penalty relief program and Notice 2024-7 as the basis for your request.
- Attach documentation showing the penalty amount that was assessed and paid.
- Mail the completed form to the IRS service center that handles your area. Use certified mail or another trackable delivery method so you have proof it arrived before the deadline.
Taxpayers who find the process confusing or who are experiencing financial hardship can contact the Taxpayer Advocate Service directly for assistance. The TAS can intervene on your behalf if normal IRS channels have not resolved the issue.
A note for tax professionals
Preparers, enrolled agents, and CPAs who served clients with 2020 and 2021 balances owed should be reviewing those files now. A systematic check of client transcripts could uncover refundable penalties that were never addressed. For clients with larger original balances, the refund amounts could be well above the $200 average.
Proactive outreach to former clients is also worth the effort. Many people who paid penalties years ago have moved on and are not monitoring IRS announcements. A brief notification that they may be owed money could be the difference between a successful claim and a forfeited refund.
54 days left to reclaim pandemic-era penalty refunds
The IRS acknowledged that millions of taxpayers were penalized unfairly during a period when the agency itself was not operating normally. The $1 billion relief program was a significant step. But for those who were not helped automatically, the burden of claiming that relief still falls squarely on the taxpayer.
If you paid a failure-to-pay penalty on a 2020 or 2021 federal return, pull your transcript this week. If the relief is not already reflected, file Form 843 well before July 10. The money may already be sitting in the system, waiting to be returned. But after the deadline, the door closes for good.
Vince Coyner is a serial entrepreneur with an MBA from Florida State. Business, finance and entrepreneurship have never been far from his mind, from starting a financial education program for middle and high school students twenty years ago to writing about American business titans more recently. Beyond business he writes about politics, culture and history.
