Could the IRS Owe You a Refund for COVID-Era Penalties?

The pandemic disrupted nearly every aspect of business operations and financial planning. For years, taxpayers assumed the late filing and payment penalties assessed by the IRS during that chaotic window were set in stone.

However, a recent federal court decision is challenging that assumption, opening the door for substantial refunds. At MJ Ahmed CPA PLLC, we have spent over 25 years helping clients across the Dallas-Fort Worth area navigate complex tax problems. This ruling is one of the most significant post-pandemic developments we have seen.

The Core Issue: Disaster Relief and IRS Deadlines

The dispute centers on a tax code provision that extends certain deadlines during federally declared disasters. Because the federal COVID disaster declaration spanned from January 2020 through May 2023, the court ruled that statutory deadlines during this period may have been postponed much longer than the IRS originally recognized.

Consequently, many late filing penalties, late payment fees, and associated interest charges assessed during the pandemic may not have been legally valid. Taxpayers who paid these fines could be entitled to recover their money.

Why the Clock is Ticking

The federal government is expected to appeal the court's decision, but taxpayers cannot afford to wait.

For most individuals and business owners, the statute of limitations to preserve your right to a refund expires on July 10, 2026. If you miss this window, you will permanently forfeit your ability to recover those funds—even if the appellate courts ultimately side with the taxpayers.

Financial professionals recommend filing a protective refund claim. This acts as a placeholder, formally reserving your right to a future refund if the broader interpretation of COVID-era deadline relief becomes settled law.

Who Might Benefit?

This opportunity spans multiple tax years. You may be affected if you:

Filed late returns between 2020 and 2023
Were penalized for late tax payments
Accrued significant IRS interest charges during the pandemic
Entered an IRS installment agreement after these specific penalties were applied

The Paperwork Requirement

Current IRS guidance dictates that protective refund claims must be submitted via paper forms rather than electronically. Preparing and mailing physical documentation is tedious, but it is the only reliable way to preserve your legal rights.

Next Steps for Dallas-Fort Worth Taxpayers

If your business paid penalties tied to COVID-era delays, do not let the 2026 deadline pass. With over 25 years of experience, MJ Ahmed CPA PLLC is ready to evaluate your situation.

Contact our office today. We will help you determine if filing a protective refund claim makes sense for your tax problems.

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