New Law Expands Disaster Relief

On Dec. 26, 2025, the president signed into law the Disaster Related Extension of Deadlines Act. This new law provides additional filing and payment deadline relief to taxpayers affected by natural disasters. Specifically, the law corrects a trap for the unwary related to refund claims for these taxpayers. The new law is effective for refund claims filed after Dec. 26, 2025.

Background

IRC Section 7508A postpones certain tax-related deadlines for up to one year due to a federally declared disaster, a significant fire, or a terrorist or military action. Treasury Regulation Section 301.7508A-1(b)(4) explains that this period of postponement does not extend the deadline; it merely allows the IRS to disregard a deadline for a period of up to one year. This distinction between “extend” and “disregard” is important because of the interplay between IRC Section 7508A’s postponement period and the lookback rule for determining the period of limitation on refunds under Section 6511(b)(2)(A).

Generally, under Section 6511(a), a claim for a refund or credit must be filed by the later of either three years from the date a return was filed or two years from when the tax was paid. In the case of a timely refund claim filed within three years of the date the return is filed, Section 6511(b)(2)(A) limits the amount allowable as a refund to the amount of tax paid within three years of the date the claim is filed, plus the period of any extension of time to file the return. Under ordinary conditions, the three-year lookback period under Section 6511(b)(2)(A) is aligned with the three-year period to claim a refund or credit under Section 6511(a). However, under certain conditions, including situations where returns are filed late due to disaster relief, a mismatch can occur between the Section 6511(a) period to file a timely refund claim and the lookback period under Section 6511(b)(2)(A) for purposes of determining the amount allowed to be refunded.

The deemed payment rules under Section 6513 are the primary reason for this mismatch. Generally, under Section 6513, amounts paid as estimated tax and income tax withheld on wages are deemed to have been paid on April 15 of the year following the year to which the prepaid amounts relate. Under the Section 6511(b)(2)(A) lookback rule, the amount allowed as a refund is limited to the amounts paid within three years of April 15, plus any extension.

Prior to the new law the IRS did not treat a postponement under Section 7508A as a period of extension. Instead, the Section 6511(b)(2)(A) lookback rule applied using the April 15 due date regardless of whether the disaster relief due date for filing the return was after that date. Taxpayers that timely filed their return after the original unextended due date (April 15) but on or before the postponed disaster relief due date could mistakenly believe that they had three years from the date of filing their return to file a timely claim for a refund and get all of their estimated tax and wage withholding payments back. In fact, the taxpayer in this situation should have filed their refund claim three years after the original unextended due date to get the full amount of the refund under the Section 6511(b)(2)(A) lookback rule.

In February 2023, the IRS attempted to address this mismatch and its consequences in a limited situation. Notice 2023-21 provides Section 6511(b)(2)(A) lookback period relief to taxpayers that were eligible to take advantage of postponed filing deadlines for 2020 and 2021 under Section 7508A due to the COVID-19 pandemic. While the notice provided relief to affected taxpayers, it was limited to only the disaster relief stemming from the COVID-19 pandemic.

Crowe observation

The U.S. Department of the Treasury and the IRS did not adopt public comments requesting expansion of application of the relief in Notice 2023-21, requiring legislation to force this change.

The new law’s changes

The Disaster Related Extension of Deadlines Act corrects the negative consequences of the interaction between the postponed disaster relief due date, the deemed payment date for estimated tax and wage withholding under Section 6513, and the Section 6511(b)(2)(A) lookback rule. The new law amends Section 7508A to provide that for the purposes of the lookback rule under Section 6511(b)(A)(2), any period of time disregarded under Section 7508A is treated as an extension of time to file a return. This amendment means that the disaster relief postponement period is added to the three-year payment window for allowable refund amounts under Section 6511(b)(A)(2). As such, taxpayers that file after the original unextended due date relying on a disaster relief postponement will be able to file their refund claim three years after their filing date and have all estimated tax payments and wage withholdings eligible to be included in the refund amount.

Crowe observation

Unlike the limited relief in Notice 2023-21, this change provides relief going forward to all taxpayers that take advantage of disaster relief and timely file returns under a disaster relief postponement by permanently preventing a mismatch under the lookback rule.

Looking ahead

The new law provides welcome relief and clarification for taxpayers that were victims of natural disasters and filed timely returns using disaster relief postponement. Certain taxpayers that previously have filed returns under disaster relief, or that file returns in the future under disaster relief, should benefit from the law’s change. Questions around the various periods of limitations that apply to taxpayers in different situations can be complex. Taxpayers that believe they might be affected or have questions about how the new law could affect them should consult their tax advisers.