The IRS’s internal watchdog, the National Taxpayer Advocate, says that eligible taxpayers should act on or before Friday, July 10, to file a claim to secure a potential COVID-19-related tax refund. It has also opened a web portal for such filings.
Under a court ruling, Kwong v. the United States, the IRS could not charge certain penalties or interest during periods when tax deadlines were postponed under federal disaster relief programs. It had decided that COVID-19 emergency laws extended the deadline to file and that the IRS owes penalty payments to taxpayers, although the case is still being litigated.
The IRS said in announcing the move on July 1 that those with an IRS Online Account can submit the form electronically through a new application available on IRS.gov, “located on the Mobile-friendly forms web page.”
“Filing a claim does not guarantee relief,” the advocate said in a blog post updated on July 6, alerting taxpayers to the pending deadline. “But missing the deadline may permanently prevent taxpayers from receiving a refund to which they may ultimately be entitled.”
Taxpayers who might be affected should review their records to determine whether they need to file a refund claim, a protective claim, an original tax return, an amendment return, or an abatement request, according to the advocate.
In the July blog post, the taxpayer advocate said that the possible impact of the court case may not be limited to just penalties and interest, and some taxpayers who overpaid between the years 2019 and 2022 might have to determine “whether they have time to file original returns, amended returns, refund claims, or protective claims.”
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.
“Many taxpayers affected by this issue have low and moderate incomes,” the taxpayer advocate added. “These taxpayers are less likely to have professional representation and to learn about complex legal developments like this one. As a result, they face a greater risk of missing the opportunity to claim refunds to which they may be entitled.”
A protective claim is one that allows a taxpayer to get a refund while the law is still uncertain, the National Taxpayer Advocate said. The individual doesn’t need to come up with the exact figure on the requested refund, it said in a post published in April.
The IRS will generally hold a protective claim until the underlying problem is resolved in the courts, it added, noting that a final resolution in the case “may take years” pending further litigation.
Ken Kies, assistant secretary at the U.S. Treasury Department, told The Associated Press earlier this year that the Trump administration believes that the Kwong case “was wrongly decided because it is a misreading of the plain language of the statute.”
“We will continue to defend the statutory language as written,” Kies said in a statement.
The Treasury Department did not immediately respond to a request for comment on Thursday.
