Taxpayer Advocate Blog on Disaster-Era Refunds
In summary
- Taxpayers that paid interest and penalties during the COVID-19 pandemic could be entitled to refunds.
- Taxpayers eligible to file refund claims must do so by July 10, 2026.
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The IRS National Taxpayer Advocate (NTA) recently highlighted on her blog potential refunds of interest and penalties assessed during the COVID-19 disaster period. Certain acts, like filing and payment due dates, are postponed under Section 7508A during a presidentially declared disaster. Taxpayers eligible for refunds generally have until July 10, 2026, to file their refund claim.
Background
The U.S. Court of Federal Claims in Kwong v. United States agreed with the taxpayer that Section 7508A postponed payment and filing due dates occurring during the COVID-19 pandemic disaster period that ran from Jan. 20, 2020, until July 10, 2023, and that related penalties and interest should be refunded. Other cases with similar issues are pending in other courts.
Crowe observation
The government is likely to continue to challenge the taxpayer’s position on this issue and is unlikely to pay any refunds while cases are pending.
Looking ahead
Taxpayers that have paid or were charged interest and penalties for acts postponed by Section 7508A disaster relief should consider whether to file a refund claim, taking into account factors such as the amount at issue and the costs that will be incurred to file a claim. Taxpayers also should consider when the period for filing such a claim expires and whether to file the refund claim as a protective claim.
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The Ending the Carried Interest Loophole Act, would replace the current preferential carried interest regime with an ordinary income inclusion.