A deadline is approaching for what has been called “a COVID tax refund.” You may indeed have the right to a refund, but it will be for certain penalties charged for tax returns filed during the pandemic.
“This is a situation where a technical tax ruling could have real taxpayer impact, but it’s not as simple as ‘the IRS owes everyone money,'” Dave Bohrman, co-founder and vice president of marketing at Tax Guard, told Yahoo Finance.
Here are the details.
A court ruling could trigger the COVID-era refunds
A court decision clarified the tax deadlines in place during disasters, such as the COVID-19 pandemic. The ruling addressed the IRS suspension of certain federal tax deadlines from Jan. 20, 2020, through July 10, 2023.
The November 2025 court ruling said that taxpayers may claim refunds for penalties assessed for filing and/or paying late, for underpaying the amount due on a return, and for other penalties and interest.
“Although the case was decided several months ago, it has recently begun attracting more attention as tax practitioners recognize its potential scope and the approaching deadlines to file refund claims,” Ivan H. Golden, a Chicago-based partner with the Taft law firm, recently wrote in an analysis of the decision.
Knowing whether you will benefit from the court ruling will take some research into your tax filing history.
“The opportunity depends on whether someone was actually assessed penalties during the COVID period, and that’s where it gets complicated,” Bohrman said. “It requires people to go back, review what was charged, and, in some cases, take action to preserve their eligibility.”
This is ‘not a new tax refund program’
Mark Gallegos, a CPA and partner with Porte Brown in Elgin, Illinois, notes that taxpayers should not expect surprise refunds or automatic notices because of the court ruling.
“The real significance of the story is not that the IRS suddenly announced a new refund program,” Gallegos told Yahoo Finance. “The significance is that a taxpayer-favorable court interpretation has created a possible path to challenge certain COVID-era penalties and interest.”
He added that this is really a story about reviewing tax accounts and preserving rights.
“Taxpayers who paid meaningful penalties or interest during the period should consider reviewing their transcripts and speaking with their advisors about whether a protective refund claim makes sense,” Gallegos said.
How much of a refund could taxpayers expect?
For a typical individual taxpayer, Gallegos believes the potential refund may be fairly modest, especially if the only issue was a relatively small late penalty or a limited amount of interest.
“The number of taxpayers who will actually recover money is likely much smaller than the headlines suggest,” Gallegos added. “First, not everyone incurred penalties or interest. Second, not everyone who did incur them will have enough dollars at issue to justify filing a claim. Third, this is still based on a court decision that is not final and may be appealed or narrowed.”
It could be another story for taxpayers who had larger compliance issues during the time period — including businesses or higher-income taxpayers that filed late, paid late, or had sizable balances due and were hit with more significant penalties and interest.
A deadline is looming
“Refund claims are generally governed by statute-of-limitations rules, so taxpayers do not have an unlimited amount of time to act,” Gallegos noted. “Based on the interpretation being discussed in connection with this case, many practitioners are focusing on July 10, 2026, as the key date by which taxpayers may want to file protective refund claims tied to this issue.”
Bohrman agreed.
“The biggest risk is that taxpayers who may qualify simply never check. With a defined deadline, it becomes a matter of awareness and follow-through,” he added.
If you think you may be owed a sizable refund under the parameters of the court decision, you should consult with a tax professional to determine your next steps.
