IRS Refund Alert: Court Ruling Opens Door for Pandemic-Era Tax Refunds Until 2026

For many Americans, the COVID-19 pandemic feels like a chapter that has already closed. Lockdowns have ended, travel has resumed, and daily life has largely returned to normal. But in the United States, the financial effects of the pandemic may still be unfolding.

A recent court decision tied to the pandemic emergency has opened the possibility that millions of taxpayers could still claim refunds from the Internal Revenue Service (IRS) if they act before a key 2026 deadline.

Tax attorneys say individuals and businesses who were charged penalties or interest during the pandemic filing pause may now have grounds to request refunds.

The Court Decision Behind the Refund Opportunity

The issue centres on how the federal government handled tax deadlines during the Covid emergency. Under 26 US Code Section 7508A(d), when a federally declared disaster occurs, tax deadlines must be postponed for the duration of the disaster period plus an additional 60 days.

A federal court ruling last November determined that the Covid public health emergency—which lasted from January 20, 2020, to May 11, 2023—qualifies under that disaster provision. Adding the extra 60 days means that tax deadlines for filings tied to the 2019 through 2022 tax years may effectively have been pushed to July 10, 2023. If that interpretation ultimately stands, lawyers argue that penalties and interest assessed during the pause may not have been valid, potentially opening the door for refunds.

Why Millions of Taxpayers Could Be Eligible

The potential scope of the refunds could be significant.

According to tax attorney Jon Wasser of Fox Rothschild, millions of taxpayers may qualify if they paid penalties or interest during the pandemic period.

Anyone — including individuals and businesses — who was charged fees by the IRS between January 20, 2020, and July 10, 2023, may request a review of those charges. Tax experts say the largest claims could come from businesses that struggled with cash-flow disruptions during lockdowns and accumulated failure-to-pay penalties. 'Millions of taxpayers could be eligible,' Wasser said, but warned that failing to file a claim before the legal deadline could permanently eliminate the opportunity.

A Major Corporate Example

One example of how the issue could play out involves data-storage giant Western Digital. The company has filed a lawsuit seeking a refund of a portion of the $53.6 million it paid in taxes, following a long-running dispute that was settled in 2023. Western Digital argues it should not have been charged roughly $21 million in interest during the pandemic pause.

Cases like this could help determine how broadly the court ruling is applied in the future.

The Deadline Matters

While the legal debate may take years to resolve, taxpayers cannot afford to wait. Refund claims are normally limited by a statute of limitations that allows taxpayers to file within three years of the original filing deadline or two years after paying the tax. Because the court ruling suggests the filing deadline shifted to July 10, 2023, the final day to preserve a claim would be July 10, 2026. Miss that date, lawyers say, and the chance to recover money could disappear.

Tax professionals say the first step is reviewing your IRS tax records. Taxpayers can examine their tax account transcripts, which show penalties, interest, and payment history for each year.

These transcripts can be obtained through the IRS Individual Online Account, requested by mail, or ordered through the agency's automated phone service. Once requested, transcripts typically arrive within five to ten days.

How to File a Refund Claim

If penalties or interest were charged during the pandemic window, taxpayers may be able to request a refund using IRS Form 843. Lawyers often recommend submitting a protective claim, citing the case of Kwong v. United States and the disaster provisions in Section 7508A(d).

A protective claim essentially tells the IRS that you are seeking a refund but are willing to wait until the courts make a final ruling.