Millions of Americans who paid late-filing or late-payment penalties on their 2020 or 2021 federal tax returns may be owed that money back by the IRS. The catch: the deadline to claim it is July 10, 2026, now fewer than 50 days away, and the IRS has done little to spread the word.
The IRS Taxpayer Advocate Service flagged the looming cutoff in an April 2026 alert, warning that “tens of millions” of filers could be leaving significant refunds unclaimed. The opportunity traces back to COVID-era disaster rules that paused penalty timelines, combined with a recent federal law that quietly restored refund rights many taxpayers never realized they had lost.
To put the potential dollars in perspective: the standard failure-to-file penalty runs 5% of unpaid taxes for each month a return is late, up to 25%. The failure-to-pay penalty adds 0.5% per month, also capping at 25%. For someone who owed $4,000 and filed five months late, the failure-to-file penalty alone would have been roughly $1,000. That is real money sitting in IRS accounts, potentially waiting to be returned.
Where this refund opportunity comes from
During the pandemic, the IRS used its disaster authority under Section 7508A of the Internal Revenue Code to push back filing and payment deadlines for millions of taxpayers. The agency also announced broad penalty relief covering 2020 and 2021 returns, effectively waiving failure-to-file and failure-to-pay penalties for those tax years.
But a legal gap created a problem. When the IRS postpones a deadline under disaster authority, that postponed date does not automatically count as an “extension” for the purpose of calculating how far back a taxpayer can reach to claim a refund. Under normal rules, taxpayers generally have three years from the date a return was filed, or two years from the date a tax was paid, whichever is later. Because the disaster postponement did not reset that clock, some taxpayers who paid penalties on their 2020 or 2021 returns found their refund window had already closed, even though the government itself had delayed their obligations.
Congress addressed the gap with H.R. 1491, signed into law as Public Law 119-64, known as the Disaster Related Extension of Deadlines Act. The law directs the IRS to treat disaster postponements as extensions when calculating refund deadlines, restoring the ability to claim money back. The fix is already showing up in IRS guidance: agency announcements granting relief for severe storms in Hawaii and wildfires in Southeast Georgia both cite H.R. 1491 as the basis for recalculating refund eligibility.
The July 10, 2026, deadline is derived from the interaction of the disaster postponement period under IRC Section 7508A(d), which provides a mandatory 60-day extension for time-sensitive acts, and the standard refund statute of limitations. Once that date passes, the window to recover COVID-era penalties closes permanently.
Which penalties qualify and who should check
The penalties at the center of this are the two most common ones the IRS assesses on individual returns: the failure-to-file penalty (IRC Section 6651(a)(1)) and the failure-to-pay penalty (IRC Section 6651(a)(2)). If you filed your 2020 or 2021 return late, paid your balance late, or both, and the IRS charged you a penalty, you may be eligible for a refund of that amount.
The reference to penalties “paid between 2020 and 2023” reflects the reality that many taxpayers did not pay these penalties right away. Some entered installment agreements. Others had penalties assessed after audits or adjustments that stretched into 2022 or 2023. The key factor is not when you paid, but whether the penalty relates to a 2020 or 2021 return that fell within the COVID disaster relief period.
According to the Taxpayer Advocate Service, the refund is not automatic in every case. Some accounts were systemically adjusted by the IRS when it processed the original penalty relief. But others, particularly those involving amended returns, audit adjustments, or installment payments, may require the taxpayer to file a specific refund claim. The Advocate’s alert urged filers to review their accounts and act before the deadline.
How to check your account and file a claim
Start by logging into your online account at IRS.gov. Your account transcript will show any penalties assessed and payments made on your 2020 and 2021 returns. Look for transaction codes related to failure-to-file or failure-to-pay penalties.
If you see a penalty that was charged but never abated or refunded, you have two main options:
- File Form 843 (Claim for Refund and Request for Abatement), specifically requesting a refund of the penalty. Cite the COVID-era penalty relief and the Disaster Related Extension of Deadlines Act as the basis for your claim.
- File Form 1040-X (Amended U.S. Individual Income Tax Return) if your situation also requires correcting other items on the original return.
In either case, the claim must be postmarked or electronically submitted by July 10, 2026. Tax professionals recommend keeping a copy of your submission and any delivery confirmation. The statute of limitations is generally preserved as long as a timely claim is on file, even if the IRS takes months to process it.
If you used a tax preparer for your 2020 or 2021 returns, contact them now. They should have records of any penalties assessed and can help determine whether your account was already adjusted or whether a new claim is needed.
What the IRS has not yet clarified
Several important questions remain open as of late May 2026. The IRS has not published data on how many refund claims have already been filed, how many accounts were automatically corrected, or the total dollar value of penalties eligible for return. No state-level breakdowns or figures by income bracket appear in any publicly available IRS materials.
It is also unclear how many eligible taxpayers even know about the deadline. The Taxpayer Advocate Service has publicized the issue through its blog, but the IRS has not announced a dedicated outreach campaign or mailed targeted notices to affected filers. That raises particular concerns about lower-income taxpayers, people who have moved since 2020 or 2021, and those who used seasonal or one-time tax preparers with no ongoing client relationship.
Edge cases add another layer of complexity. Tax professionals have raised questions about how the recalculated refund windows apply to taxpayers who filed very late, paid penalties in multiple installments, or had their returns adjusted through audits years after the original due date. The publicly available IRS guidance does not address each of these scenarios in detail. It is also unresolved whether interest that accrued on overpaid penalties is separately refundable, a question that could meaningfully increase the total amount owed back to some filers.
Processing capacity is a practical concern as well. If a wave of amended returns and refund claims arrives in the final weeks before July 10, the IRS could face backlogs. Filing on time should preserve your claim, but delays in review and payment could stretch for months, with limited visibility into where your case stands.
Why checking now costs nothing and could pay off
The Disaster Related Extension of Deadlines Act was designed as a technical correction, not a scored stimulus program. Congress did not attach formal cost estimates or reporting requirements to the law. That means phrases like “tens of millions of taxpayers” and “significant refunds,” drawn from the Taxpayer Advocate’s characterization, are the closest thing to an official projection available.
Without detailed reporting from the IRS, there is no way to know how much money is actually reaching affected households or how much will go unclaimed after the deadline passes. But the math is simple enough to run on your own: pull up your 2020 and 2021 transcripts, look for penalty charges, and see if they were ever reversed. The paperwork is straightforward, the filing is free, and for anyone who paid a penalty on a pandemic-era return, a few minutes on IRS.gov could surface money the government already owes you.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
