Millions of taxpayers who paid failure-to-pay penalties on their 2020 or 2021 federal returns may be owed refunds they have never collected. In late 2023, the IRS announced it would automatically reverse those penalties for filers whose assessed balance was under $100,000, a direct response to the disruptions caused by the COVID-19 pandemic. But more than two years later, the rollout has been uneven. Some eligible taxpayers received automatic credits. Others got nothing and were never notified. The clock to file a refund claim is now running out. Organizations such as the American Institute of CPAs and several enrolled-agent associations have flagged early July as the critical window in recent member communications, with the effective deadline falling around July 10 based on how the statute of limitations interacts with pandemic-era extensions. That leaves roughly 50 days to act.
What the IRS penalty relief program covers
In December 2023, the IRS published Fact Sheet FS-2023-28, outlining automatic relief from failure-to-pay penalties on 2020 and 2021 individual income tax returns where the assessed balance was below $100,000. The penalties targeted are those tied to CP14 and CP161 notices, the standard balance-due letters the IRS sends after processing a return. For qualifying taxpayers, the agency committed to either preventing the penalty from accruing further or refunding amounts already collected.
The legal foundation rests on the COVID-19 national emergency declared on March 13, 2020, which triggered disaster-relief authority under Section 7508A of the Internal Revenue Code. That statute allows the Treasury Secretary to grant a mandatory 60-day extension for time-sensitive tax acts during a federally declared disaster. The IRS formalized the postponement through Notice 2020-23, documented in Internal Revenue Bulletin 2020-26. Section 7508A remains the backbone of the penalty relief program and the statutory basis for refund claims still being filed in mid-2026.
The dollars at stake are not trivial. Failure-to-pay penalties accrue at 0.5% of the unpaid tax per month (0.25% if an installment agreement is in place), capping at 25% of the total balance. On a $10,000 tax debt left unpaid for two years, the penalty alone could exceed $1,200. For a filer who paid that penalty and qualifies for relief, the refund represents real money, and under IRC Section 6611, the IRS generally owes interest on refunded penalty overpayments as well.
Why the headline references 2020 through 2023
The IRS fact sheet explicitly names 2020 and 2021 tax returns. Those are the years with the clearest, most direct agency backing. However, some tax practitioners have argued that the same Section 7508A disaster-declaration logic could extend relief to failure-to-pay penalties assessed on 2022 or even 2023 returns, depending on how the mandatory extension windows interact with the standard refund-claim statute of limitations. The National Taxpayer Advocate’s office has previously noted the complexity of overlapping disaster-period calculations, though it has not issued specific guidance endorsing claims for those later years.
As of late May 2026, no primary IRS document reviewed for this article confirms that interpretation. Taxpayers or preparers applying the theory to later tax years are working from statutory inference, not direct agency guidance, and any such claims carry a higher risk of challenge or delay. If you believe you have a case for 2022 or 2023 penalties, consulting a credentialed tax professional before filing is strongly advisable.
Where the July 10 deadline comes from
No IRS fact sheet or bulletin spells out July 10 as a hard cutoff. The date is derived from practitioner analysis of how Section 7508A’s mandatory 60-day extension interacts with the original penalty assessment periods and the general three-year statute of limitations for refund claims under Section 6511 of the Internal Revenue Code. The American Institute of CPAs and several enrolled-agent associations have flagged early July as the critical window in recent member communications.
Because the exact calculation depends on individual facts, including when a specific CP14 or CP161 notice was issued, the deadline could shift slightly from one taxpayer to the next. Treating early July as a hard boundary is the safer approach. Once the refund-claim window closes, the IRS has no obligation to return the money, regardless of whether the penalty should never have been charged in the first place.
What the IRS has not disclosed
The agency has not published aggregate figures showing how many refunds have been processed under FS-2023-28 or the total dollar amount returned. Without that data, there is no way to gauge how many eligible filers are still waiting or were never notified. Practitioners report inconsistent results: some clients saw automatic credits appear on their accounts without lifting a finger, while others with nearly identical facts had to file written claims and wait months for resolution.
It also remains unclear whether the relief extends to certain business or trust returns. FS-2023-28 references individual income tax returns most directly, though some entity returns may qualify depending on the type of notice issued. Taxpayers who were on installment agreements during 2020 or 2021 should pay particular attention; the fact sheet does address installment-agreement scenarios, and the reduced 0.25% penalty rate may affect the refund calculation. Anyone with a business account or entity return should review their specific transcripts rather than assume coverage.
How to check your eligibility and claim a refund before time runs out
Start by logging into your IRS online account and pulling up your 2020 and 2021 tax records. Account transcripts, available electronically or by mail, will show line-by-line penalty assessments and any subsequent abatements or credits. If you see the penalty was reversed or a refund was issued, no further action is needed.
If the penalty is still on your account or the refund never arrived, call the IRS and reference the COVID-related failure-to-pay relief described in FS-2023-28. Be specific about the tax year and the notice number (CP14 or CP161). If the phone agent cannot process the abatement on the spot, the next step is to file Form 843 (Claim for Refund and Request for Abatement) in writing. Attach a brief explanation citing the relevant tax year, the notice, and the COVID-19 disaster period. Including copies of your notices, transcripts, and proof of payment will reduce back-and-forth correspondence and speed up processing.
For taxpayers who also owe a remaining balance they cannot pay in full, the IRS offers installment agreements and offers in compromise. The agency’s online pre-qualifier tool can help determine whether you might settle your debt for less than the full amount. That step does not replace a penalty refund claim but can be part of a broader plan to resolve your IRS account.
The Taxpayer Advocate Service is another resource worth knowing about, particularly for filers who have already tried to resolve the issue directly and hit procedural walls or inconsistent responses from IRS agents.
Why filing Form 843 before July 10 could save you hundreds or thousands
The IRS’s own materials make clear that qualifying 2020 and 2021 failure-to-pay penalties were never supposed to stick. The relief program exists because the agency recognized that pandemic-era disruptions made normal collection timelines unfair. But good intentions do not guarantee automatic execution. If your refund has not shown up on your transcript, the burden falls on you to claim it, and the statute of limitations does not care whether you knew the program existed. Pull your transcripts, make the call, and file Form 843 if needed. The July 10 window is closing, and once it shuts, the money stays with the IRS for good.
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.
