The IRS May Owe You a COVID-Era Refund (Deadline: July 2026)

Why It Matters

Taxpayers and companies that paid pandemic-era penalties or interest could recover hundreds to billions of dollars, but must act before the July 10, 2026 filing cutoff amid ongoing litigation and an uncertain final outcome.

Summary

Recent court rulings have found the IRS misapplied interest and penalty accrual rules tied to the COVID-era disaster period, potentially entitling taxpayers who paid federal income tax-related penalties or interest between Jan. 20, 2020 and July 10, 2023 to refunds. Two key cases—ABDO (Tax Court) and Kuang (Court of Federal Claims)—concluded the automatic postponement under section 7508A should have suspended accruals for the statutory disaster period, overturning the IRS’s narrower interpretation. The IRS has appealed key rulings and says it agrees only with a limited postponement, leaving legal uncertainty, but tax advocates and the IRS’s Taxpayer Advocate have signaled taxpayers should review past payments. A deadline to file refund claims is looming: July 10, 2026, after which many claims may be time-barred.

Original Description

Did you pay IRS penalties or interest during the COVID years? The IRS may owe you a refund.

In this episode, Thomas Castelli and Nathan Sosa break down two major court cases that could impact taxpayers who paid penalties and interest between 2020 and 2023.

They explain why recent court rulings have challenged the IRS's interpretation of COVID-era tax relief, who may be eligible for a refund, and what steps you should take before the July 2026 deadline.

You'll learn:

- Why the IRS's handling of COVID-era penalties and interest is being challenged

- How the Kwong and Abdo cases could affect taxpayers

- Who may qualify for a refund

- How to check your IRS transcripts for potential claims

- What a protective claim is and why filing one may be important

- Why real estate investors and business owners should pay particular attention

Plus, Thomas and Nathan answer a listener question about short-term rental tax strategy, cost segregation studies, and how personal use can impact your ability to utilize losses.

Important: This opportunity is not guaranteed, and the IRS is continuing to challenge portions of these rulings. However, taxpayers may need to take action before July 10, 2026, to preserve their rights.

If you're wondering whether you may qualify, this is an episode you won't want to miss.

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00:00 Introduction: IRS Refund Opportunity for COVID-Era Penalties & Interest

00:46 What You'll Learn in This Episode

00:54 Short-Term Rental Tax Strategy Bundle

01:33 The IRS May Owe Taxpayers a Refund

01:47 The COVID Disaster Relief Law Explained

03:20 How the IRS Interpreted the Rules

04:10 ABDO v. Commissioner Explained

05:08 Kwong v. United States: The IRS Refund Case Explained

05:57 Who Is Eligible for a Refund?

06:22 The IRS Appeal and What Happens Next

07:15 How to Check Whether You Qualify

08:04 Filing Form 843 and Protective Claims

09:02 Tax Planning for Real Estate Investors and Business Owners

10:06 Why Filing a Protective Claim Is Important

10:45 Why Real Estate Investors Should Pay Attention

12:00 Building a Strong Refund Claim

13:02 Should You Hire a Tax Professional?

13:19 How Hall CPA Is Helping Clients File Claims

15:09 Final Thoughts on the Kwong Case

16:01 Why Your CPA May Not Know About This Yet

16:17 Could Congress Force the IRS to Issue Refunds?

16:58 Listener Question: Using an STR Before Placing It in Service

18:00 Understanding the 14-Day Personal Use Rule

19:20 How to Avoid Triggering Vacation Rental Limitations

20:35 Submit Your Tax Questions for Future Episodes

20:43 Working With Hall CPA on Tax Strategy

21:00 Episode Wrap-Up & Key Takeaways

21:03 Podcast Disclaimer

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