Tens of millions of taxpayers who were penalized by the IRS during the COVID-19 pandemic for failing to pay their taxes or filing late could qualify for a refund, but they’ll need to act fast.
According to the IRS National Taxpayer Advocate blog, the deadline to apply for a refund for any penalties incurred is Friday, July 10. The claim form can be filled out online through the IRS website.
However, the relief is not automatic or guaranteed, and not everyone qualifies. As the clock ticks down, here’s what to know about filing a claim for the COVID-19 pandemic tax refund.
What is the COVID tax refund?
The IRS had assessed more than 120 million penalties against tens of millions of taxpayers for filing late returns, failing to pay taxes or failing to make required estimated tax payments between January 2020 and July 11, 2023. At that time, a federal disaster declaration was in effect.
The case, called Kwong v. U.S., decided that COVID-19 emergency laws extended the deadline to file and that the IRS owes penalty payments to taxpayers.
“Based on the court’s reasoning in Kwong, filing and payment deadlines were postponed during that entire period, and as a result, tax returns and payments due anytime within that window were not late until after July 10, 2023,” the blog said. “By the court’s logic, the IRS should not have assessed penalties for late filing or payment during that 3.5-year period, nor charged interest on those amounts.”
The decision means some may be entitled to a refund or abatement of certain amounts assessed during that period.
How to apply and file a claim
People eligible for a potential refund or abatement are those who filed a tax return late between Jan. 20, 2020, and July 11, 2023; paid penalties for filing or paying late during that period; owed IRS penalties even if they have not paid them; or filed an international information return late.
In a series of blog posts on its website, the taxpayer advocate is sharing recommendations — including that people review their IRS tax account transcripts through their online account — to check penalty assessments from those periods.
People will need to fill out Form 843, which can be found on the IRS website. Previously, the form was only available to be mailed in, but it can now be filled out online.
Those who choose to mail the form are advised to do so via certified mail to prove it was submitted by the deadline.
Who’s affected, and who may qualify
According to the taxpayer advocate, the issue was “widespread” and not limited to a small group of taxpayers.
“As noted, tens of millions of taxpayers have been assessed penalties or interest for late filings or payments during these years,” it said.
The advocate went on to say that those who may qualify represent a broad cross-section of the public, “including individuals, small businesses, large corporations, estates, and trusts.”
According to the NTA, anyone who saw the following fees assessed during the COVID-19 federal disaster time period should receive an abatement or refund after filing a claim:
Penalties assessed for failure to timely file returns, failure to pay taxes, or failure to make estimated tax payments; Interest that began accruing earlier than it should have, or not at all; and Overpayment interest for the 2020–2023 disaster period.More information about the COVID tax penalty refund can be found here.
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