Many Americans are happy to leave the memories of the COVID-19 pandemic behind, but revisiting that period could be worthwhile — especially for those who may be eligible for an IRS tax refund, according to tax attorneys and reporting from USA Today.

Under the tax code, Section 7508A(d) requires the postponement of certain tax deadlines during a federally declared disaster, plus an additional 60 days after the disaster period ends. A federal court ruled last November that the COVID-19 public health emergency, which lasted from Jan. 20, 2020, through May 11, 2023, qualifies under this provision. With the extra 60 days added, the filing deadline for tax years 2019 through 2022 would have effectively been extended to July 10, 2023.

Because taxes were not considered due during that period, the IRS may not have had the authority to assess penalties or interest, tax attorneys said. As a result, taxpayers who were charged late fees or penalties during that time could be eligible for refunds. 

The IRS is expected to appeal the ruling, but taxpayers may not have the luxury of waiting for the outcome. Under federal law, there is a limited window to file a claim for a potential refund or a reduction in penalties or interest.

“Millions of taxpayers could be eligible,” said Jon Wasser, a partner at Fox Rothschild. “But if people don’t file claims before July 10, 2026, they could miss out on the opportunity to receive a refund or have penalties and interest reduced.”

Eligibility Criteria for Pandemic-Era Tax Refunds    

Recent legal challenges have opened a window for taxpayers to reclaim funds from the IRS. Specifically, any individual or entity charged interest or penalties during the federally declared disaster window—January 20, 2020, through July 10, 2023—should evaluate their eligibility for a refund.

Tax attorney Jessica Marine of Frost Law recently highlighted the impact of these “failure-to-pay” penalties, noting that for businesses facing cash-flow issues during the pandemic, the recoverable amounts could be “significant.” Because these penalties were often calculated based on substantial tax liabilities, the refund opportunity represents a major financial recovery for many organizations.    

Western Digital Litigation: A Catalyst for Refunds

Following the resolution of a tax battle stretching back to 2008, data storage leader Western Digital paid $53.6 million to the government in 2023. However, they aren’t letting the matter rest there.

In a lawsuit filed this past February, the company argues it is owed a $21 million refund for interest charges that accrued during the “pandemic pause.” This move underscores a critical opportunity for businesses to audit their pandemic-era tax payments for overcharges.     

Timing and Deadlines: Navigating the statute of limitations is critical for a successful recovery. Generally, taxpayers have three years from filing or two years from payment to seek a refund. Under the new precedent set by recent litigation, the industry-wide target date is July 10, 2026. Missing this deadline could mean forfeiting “significant” potential abatements.

Assessing Your Exposure: To determine your eligibility, you must verify if the IRS assessed penalties during the 2020–2023 pause. The most reliable method is obtaining an IRS Tax Account Transcript, which provides a comprehensive record of all assessments, including the exact dates and types of interest or penalties applied.

Accessing Records: Transcripts are available through the IRS’s digital portal for immediate review. Alternatively, those preferring hard copies can request them via the IRS automated phone service (800-908-9946), with a typical 5-to-10-day turnaround. 

The “Protective Claim” Strategy 

When filing, it is critical to designate your submission as a “Protective Claim.” This should explicitly reference the Kwong v. United States decision and Section 7508A(d) regarding the COVID-19 disaster period.

Think of a protective claim as a placeholder. You are notifying the IRS that you are preserving your right to a refund while the courts reach a final determination. By putting the IRS on notice now, you ensure that once the litigation is finalized, you are first in line for your payout—even if the statute of limitations expires while the case is pending.