Millions of Americans paid late-filing or late-payment penalties to the IRS on returns from tax years 2019 through 2022, often because the agency itself stopped sending collection notices during the pandemic. Now the federal government may owe that money back. But the window to claim it is closing fast: after July 10, 2026, the statute of limitations expires, and any unclaimed refunds stay with the Treasury for good.
The National Taxpayer Advocate raised the alarm in an April 2026 advisory, estimating that tens of millions of taxpayers fall within the broad universe of people potentially eligible for significant refunds. The penalties at stake range from a few hundred dollars for individual filers to several thousand for small businesses and tax-exempt organizations that fell behind during COVID-19 shutdowns. For a sole proprietor who owed $5,000 in taxes and was assessed the standard 0.5%-per-month failure-to-pay penalty over two years, the penalty alone could exceed $600, not counting interest. Multiply that across multiple tax years, and the amounts add up quickly.
How the refund window opened
The refund opportunity traces back to a series of IRS relief measures issued during and after the pandemic. In late 2022, the agency published Notice 2022-36, which automatically wiped out failure-to-file penalties for taxpayers who submitted their 2019 and 2020 returns by September 30, 2022. Millions of refunds and credits went out without taxpayers lifting a finger.
Separately, the IRS granted automatic relief from failure-to-pay penalties for tax years 2020 and 2021. That relief addressed a specific problem: the agency had suspended its automated collection reminder notices during the pandemic, meaning many taxpayers never received the warnings that would have prompted them to pay down balances before penalties piled up. The IRS Internal Revenue Manual confirms that an automatic waiver applied under narrow conditions tied to that notice pause.
These are two distinct categories of relief, and the distinction matters. Notice 2022-36 dealt with penalties for filing late. The notice-pause relief dealt with penalties for paying late. A taxpayer could qualify for one, both, or neither, depending on their circumstances.
Critically, neither automatic program caught everyone. Taxpayers who filed after the September 2022 cutoff, who owed penalties for tax year 2022, or whose failure-to-pay situations did not align neatly with the notice-pause rules received no automatic relief. They have to ask for it themselves, and they need to do so before July 10.
Why July 10, 2026 is the hard cutoff
Under 26 U.S.C. §6511, taxpayers generally must file a refund claim within three years of the return’s due date or two years from the date of payment, whichever is later. Normally, that would produce different deadlines for each tax year. But the IRS extended multiple filing deadlines under COVID-19 disaster declarations, pushing the due dates for tax years 2019 through 2022 later than usual. The result: the three-year refund windows for all four years converge on a single date, July 10, 2026.
The Taxpayer Advocate’s office published a detailed breakdown of how the statutory math works across each tax year. Once that date passes, the IRS loses its legal authority to issue refunds for these periods, regardless of whether the taxpayer was clearly overcharged. There are no extensions and no appeals process for a missed statute of limitations.
What remains unresolved
Several important questions are still open as the deadline approaches. The IRS has not disclosed how many taxpayers already received automatic relief under Notice 2022-36 or the failure-to-pay waiver. That means the gap between the Advocate’s “tens of millions” estimate and the number of people who still need to act is unknown. Taxpayers who are unsure whether they already received relief should check their IRS Online Account or request account transcripts, which will show whether penalties were assessed, abated, or refunded.
The Taxpayer Advocate has also flagged the possibility that Treasury or Congress could take additional administrative or legislative action before the deadline, but as of late May 2026, nothing has materialized. Without intervention, the burden falls on individual taxpayers and their preparers to file in time.
Processing timelines add another layer of risk. The IRS has not published current approval rates or average wait times for protective refund claims, whether filed online or by mail. Taxpayers who submit claims in the final days before July 10 risk having incomplete or misdirected paperwork rejected after the statute expires. The Advocate has urged filers not to wait.
How to file before the deadline
The first step is confirming whether penalties or related interest were actually assessed and paid for the relevant tax years. That means pulling IRS account transcripts, not just reviewing copies of original returns. Transcripts show penalty charges, interest accruals, and any offsets where later refunds were applied to cover old balances. Those offsets can count as “payments” for statute-of-limitations purposes under IRC §6511(b)(2). In plain terms: if the IRS took a refund you were owed and applied it to a penalty balance, that counts as you having paid the penalty, and you may be entitled to get it back.
Once penalties are identified, taxpayers or their preparers need to choose between two filing options:
- Formal refund claim: Typically filed on an amended return (Form 1040-X for individuals) or Form 843 (Claim for Refund and Request for Abatement). This requests a specific dollar amount and explains the legal basis for removing the penalty.
- Protective refund claim: Filed when the exact refund amount is not yet known or when the legal basis is still being developed. A protective claim preserves the taxpayer’s right to a refund before the statute expires, buying time for the IRS to process it once the facts or law are settled. The Taxpayer Advocate’s May 2026 guidance strongly recommends this approach for pandemic-era penalties, where agency rules have shifted repeatedly.
A protective claim should identify the tax periods involved, describe the penalties at issue, and state the legal grounds for relief, even in general terms. It can be mailed to the IRS service center where the original return was filed.
Tax professionals also recommend documenting any pandemic-related circumstances that affected a filer’s ability to meet deadlines: illness, business closures, disrupted mail, or inability to reach the IRS by phone during peak backlogs. While the current relief framework rests on broad disaster declarations and IRS administrative actions, individual facts still matter in close cases, particularly where reasonable-cause penalty abatement is requested alongside disaster-based relief.
Where to get free help before July 10
Taxpayers who cannot afford professional assistance have options. The Taxpayer Advocate Service (TAS), an independent organization within the IRS, can assist filers experiencing financial hardship or whose cases are stuck in processing. Every state has a local TAS office, and cases can be initiated by calling 877-777-4778 or visiting the TAS website.
Low Income Taxpayer Clinics (LITCs), funded in part by IRS grants, provide free or low-cost representation to qualifying taxpayers in disputes with the agency. A searchable directory of LITCs is available on the IRS website.
The Taxpayer Advocate’s message is direct: the refund opportunity is real, the amounts can be substantial, and the deadline is absolute. Taxpayers who pull their transcripts now, file well-supported claims, and submit them well before July 10, 2026, stand the best chance of recovering money the IRS should never have kept. Those who miss the date will have no second chance.
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.
