Deadline Approaching to Claim Refund for COVID-19 Penalties and Interest

Earlier this month, the National Tax Advocate updated their blog regarding possible refunds or abatements taxpayers (individuals, small businesses, large corporations, estate, and trusts) may be entitled to resulting from penalties and interest during the COVID-19 federal disaster period from January 20, 2020, through July 10, 2023.

As you may recall, the pandemic was the catalyst for many changes to tax filing deadlines and disaster relief dates. With filing and payment deadlines postponed, tax returns and payments due anytime during that window were not late until July 10, 2023. According to a ruling made in Kwong v. United States, 179 Fed. Cl. 382 (Nov. 2025), the IRS should not have assessed penalties for late filing or payment during that 3.5-year period (after July 10, 2023), nor charged interest on those amounts.

Do You Qualify? Review IRS Transcripts for Key Codes

In order to determine if you or your business qualify for a refund or abatement, you will need to access and review your IRS transcripts.

According to the NTA, taxpayers are advised to “look for penalties assessed for failure to file, failure to pay, and failure to make estimated tax payments between January 20, 2020, and July 10, 2023. These will appear on the transcript with specific transaction codes (TCs).

Key codes include:

• TC 166: Penalty for late filing
• TC 276: Failure to pay tax penalty
• TC 196: Interest charged.”

Refunds Not Automatic: File Claim by July 10, 2026

Taxpayers who find a transaction code for penalties or interest will need to file a claim on or before July 10, 2026, using Form 843, Claim for Refund and Request for Abatement. Since the law in this area is still being litigated, taxpayers should also consider filing protective claims to preserve their rights.

Protective claims prevent the period of limitations from expiring while waiting for a final resolution. Unfortunately, the resolution may take years, but it is important to check your transcripts now to know if you should file a claim in order to preserve your right to a refund while the law is still uncertain.

Please note that you do not need to calculate the exact amount of your requested refund but you will need the following to file a protective claim:

• must identify and describe the contingencies affecting the claim;
• must be sufficiently clear and definite to alert the IRS as to the essential nature of the claim; and
• must identify a specific year or years for which a refund is sought.”

Questions?

As always, should you have questions on this or other matters affecting you or your business, please call 215.675.8364 or email us to speak with a CPA today.

DISCLAIMER: All communications by Wouch, Maloney & Co., LLP intend to provide general information, as of the date of the communication, and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. Please be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.