Many businesses and individuals may be excited to learn about recent legal developments which could support refunds or removal (abatement) of interest charges on late payments of taxes, late payment penalties, and late filing penalties that arose during the time the federal government’s COVID‑19 emergency disaster declaration was in effect. Affected taxpayers must act promptly to claim potential refunds or abatement of these items.
Basis for COVID-Era Suspension
In 2024, the United States Tax Court in Abdo v. Commissioner determined that certain tax deadlines had been postponed under Internal Revenue Code section 7508A after the federal government declared a nationwide emergency in response to the COVID‑19 pandemic. Recently, the Court of Federal Claims in Kwong v. United States determined that this postponement period began on Jan. 20, 2020, and ended on July 10, 2023.
What This Means
Although the courts in Abdo and Kwong did not specifically address whether interest and penalties should be postponed or suspended during the relevant period, the reasoning of the courts in those cases supports the argument that interest and penalties on delinquent federal taxes and returns were suspended from Jan. 20, 2020, through July 10, 2023 (the “postponement period”). Therefore, payments of interest and penalties that accrued during this time might be refundable if timely refund claims can still be filed. As applicable here, certain refund claims would have to be filed by July 10, 2026.
Taxpayers are also eligible to request abatement of unpaid interest and penalties to the extent attributable to the postponement period; however, keep in mind that certain delinquency-related penalties reach a maximum amount over time. This means there may be situations where no meaningful relief is available because the penalty computations restarted after the suspension period ended.
Therefore, if you have paid interest or certain penalties relating to the specified COVID‑era period or still have such amounts outstanding, you should consider filing claims with the IRS requesting a refund or abatement of these amounts. If the IRS denies these claims, you may have the right to appeal and, in appropriate circumstances, pursue judicial review.
Are you a Potential Candidate?
Please contact us as soon as possible if you believe you may qualify, or if you have questions about your eligibility or the process.
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