2026 Tax Alert: Potential refund opportunities for certain COVID-era IRS penalties and interest

Why This Matters  

Some taxpayers may have paid IRS penalties or interest during the pandemic that may not have been owed—and the time to preserve a refund claim could be limited.

A recent decision from the U.S. Court of Federal Claims interpreted a COVID-related disaster relief rule to mean that certain federal tax due dates were automatically put on hold during the federal COVID disaster period, plus an additional statutory buffer.  If that interpretation is applied more broadly, some late-filing/late-payment penalties and related interest that posted during that window may be worth reviewing.

Who Should Take a Closer Look

• Individuals or businesses assessed (or who paid) failure-to-file or failure-to-pay penalties for dates during 2020 through mid-2023.
• Taxpayers charged significant underpayment interest tied to a payment the IRS treated as due during that same period.
• Taxpayers with large balances, installment agreements, or prior penalty abatements where interest/penalty amounts were meaningful.
• Taxpayers with long running IRS examinations that have recently been assessed underpayment interest that included the period of 2020 through mid-2023.  

Practical Steps (Simple and Actionable)

1. Pull IRS account transcripts and identify penalty/interest items that relate to due dates between early 2020 and mid-2023.
2. Estimate the dollars at stake and prioritize high-impact tax periods first.
3. Consider filing a protective refund/abatement claim (often using Form 843) to preserve refund rights before any limitation period expires, even if the law is still developing.

Important Caveats

• This is an evolving area and could change with further court action or IRS guidance.
• Not every tax deadline is affected in the same way; results depend on the specific tax type, due date, and account history.
• Refund claims are time-sensitive, so early screening can matter.

We Can Help

Our team can help identify whether your account shows potentially affected penalties or interest and discuss whether a protective filing is appropriate.

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The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.