The Covid-19 pandemic disrupted many aspects of daily life, including the ability of some taxpayers to meet their US tax obligations. To provide relief, the US government extended a number of tax deadlines under emergency measures. However, other than for some limited reliefs, the IRS continued to issue penalties and interest in accordance with standard practice and taxpayers made the consequent payments.

In a recent case before the US Court of Federal Claims, the court held that certain tax-related deadlines were subject to a mandatory postponement during the Covid-19 Emergency Declaration period from 20 January 2020 to 10 July 2023. This has raised the possibility that the IRS was precluded from levying late payment interest and various penalties during that period, and so taxpayers who incurred them could potentially seek their abatement and refund.

The matter is by no means settled, with the IRS appealing the ruling. It is therefore likely that any refund claims won’t be automatically granted, with delays likely until any court action has concluded.

However, taxpayers should be aware of the 10 July 2026 deadline for filing refund claims relating to this period. Those who incurred significant penalties or interest may wish to consider submitting protective claims to preserve their position while the appeals process continues.

What should taxpayers do now?

• Taxpayers who paid significant IRS penalties or interest between 20 January 2020 and 10 July 2023 may wish to review their position ahead of the 10 July 2026 deadline. While the outcome of the appeal remains uncertain, taking action now could help preserve potential refund opportunities. It will be important for taxpayers to balance any potential refunds against the costs of pursuing a claim, including advisory fees.

• Given the ongoing appeal, taxpayers should carefully consider their position and any applicable filing deadlines.