Americans are probably happy to put memories of the COVID-19 pandemic behind them, but it may be worthwhile to stir up the past to see if they may qualify for an IRS refund, tax attorneys said.
Once a federally declared disaster is in effect, tax code Section 7508A(d) mandates postponement of applicable tax deadlines for the disaster period plus 60 days. A federal court ruled last November that the COVID-19 public health emergency from Jan. 20, 2020, through May 11, 2023, fell under this provision. Add in 60 days, and the new tax deadline for tax year 2019, 2020, 2021 and 2022 filings would have been July 10, 2023.
Without taxes due, the IRS likely also had no right to levy penalties and interests during that window, tax lawyers said. So, if you were charged penalties or fees, you may be owed a refund, they said.
The IRS will probably appeal the ruling, but taxpayers can’t wait that long to make a claim. By law, taxpayers only have limited time to file for a potential refund or reduction in penalties or interest.
“Millions of taxpayers could be eligible, but if people don’t file claims before July 10, 2026, they lose out on the potential for a refund or abatement,” said Jon Wasser, partner at Fox Rothschild who focuses on tax issues.
1. Who qualifies?
Any business or individual charged penalties or interest between Jan. 20, 2020, and July 10, 2023, may be eligible to ask for a refund, lawyers said.
“The potential dollar amounts could be significant, particularly for businesses that faced liquidity challenges during the pandemic and incurred substantial failure-to-pay (taxes) penalties,” wrote Jessica Marine, partner at Frost Law, in a blog post last month.
In February, Western Digital sued the government, seeking a refund on a portion of the $53.6 million it paid in taxes in August 2023 when its tax dispute that stretched back to 2008 was resolved. The data storage company said it shouldn’t have been charged nearly $21 million in interest during the pandemic pause.
2. Why is there a deadline to make a claim and when is it?
The statute of limitations for refund claims generally runs three years from the time the return was filed or two years from the time the tax was paid, whichever is later, lawyers said.
Since the court ruling in November suggested tax deadlines were moved to July 10, 2023, three years from that date would be July 10, 2026 – the last day to preserve your claim for a potential refund or abatement, Wasser said.
3. How does someone know if they may be owed a refund?
Taxpayers need to check their tax records to see if the IRS levied any penalties or interest during the tax filing pause, Wasser said. They can do that by either asking their tax professionals or looking at their IRS tax transcript.
IRS tax account transcripts show each year’s tax information, including filing status, taxable income and adjustments made after the original return was processed. It also shows payments, penalties and interest with dates they were made or assessed.
Tax account transcripts are available online by registering to use the Individual Online Account to view, print, or download, or by mail, according to the IRS. Americans can order one by mail on the IRS website or by calling the automated phone transcript service at 800-908-9946. It should arrive in five to 10 calendar days.
4. How do I claim a refund?
Tax professionals can file claims on behalf of a taxpayer, or a taxpayer may file one using IRS Form 843, claim for refund and request for abatement, using information from the tax transcript, Wasser said.
A taxpayer should specify on the form that it’s a protective claim based on the Kwong v. United States decision regarding Section 7508A(d) and the COVID-19 disaster period, lawyers said.
“You’re basically telling the IRS, ‘here’s a refund claim, put it on hold for now’ ” until the case has a final determination, Wasser said. If, after all litigation is complete and the IRS must issue refunds, you would have preserved your right to claim yours.
“You just need to put the IRS on notice now,” Wasser said.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
This article originally appeared on USA TODAY: Millions of Americans may be owed a tax refund from COVID. How to get it.
Reporting by Medora Lee, USA TODAY / USA TODAY
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