The IRS May Owe You Money From the Pandemic Years—But You Have to Claim It

Why It Matters

Potential refunds could affect millions of individual filers and reduce IRS revenue, while setting a precedent for how disaster‑related tax extensions are administered.

Key Takeaways

• Court extended tax deadlines to July 11 2023.
• IRS may have charged unlawful penalties during COVID emergency.
• Taxpayers can request refunds using Form 843.
• Corporate lawsuit seeks $21 million from IRS.
• IRS could appeal, making outcome uncertain.

Pulse Analysis

The pandemic prompted the IRS to issue broad deadline extensions under IRC Section 7508A, allowing taxpayers to file returns, pay taxes, or claim refunds well beyond the standard April deadline. The Kwong v. United States decision clarified that the statutory grace period lasted until July 11 2023, effectively nullifying any penalties or interest assessed during the emergency and the subsequent 60‑day buffer. This legal interpretation underscores how courts can reshape tax administration during national crises.

For individual taxpayers, the ruling opens a pathway to recover potentially overpaid penalties or interest. The first step is to obtain a tax account transcript from the IRS, which details any assessed charges during the pandemic window. Armed with that information, taxpayers—or their advisors—can submit Form 843, Request for Refund and Claim for Refund, to the IRS, citing the court’s decision as the basis for relief. While the process requires documentation, the potential financial benefit makes it worthwhile for those who see unexpected charges on their records.

Beyond individual refunds, the decision has broader fiscal implications. The IRS could face a wave of refund claims, impacting short‑term cash flow and prompting a review of its disaster‑relief protocols. Corporate entities, exemplified by Western Digital’s $21 million lawsuit, may also pursue sizable recoveries, signaling heightened scrutiny of the agency’s pandemic‑era assessments. As the IRS considers an appeal, the outcome will influence future legislative guidance on tax extensions during emergencies, shaping compliance strategies for both the agency and taxpayers.