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Are You Owed a COVID-Era IRS Penalty Refund? How to Protect Your Claim

The disruptions of the pandemic extended into every corner of life, including how we interacted with the IRS. Filing deadlines shifted, processing times slowed to a crawl, and business operations were turned upside down.

Now, a recent federal court case is bringing a supposedly closed chapter back into the spotlight. The central question: Did the IRS improperly charge taxpayers penalties and interest during the COVID-19 pandemic?

If the answer holds up as a yes, millions of individuals and business owners could be entitled to get that money back.

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The Court Ruling That Changes the Math

At the heart of this issue is a tax code provision that automatically postpones certain IRS deadlines during a federally declared disaster. Because the federal COVID disaster declaration ran continuously from January 2020 through May 2023, a federal court recently determined that many filing and payment deadlines should have been extended much further than the IRS originally allowed.

For high-income professionals and business owners, the practical impact is significant. If you were hit with penalties for late filing or late payment—along with the compounding interest attached to those balances—during those pandemic years, you might not have legally owed those fees. If you paid them, you might qualify for a refund.

The July 2026 Deadline and Protective Claims

Here is where proactive planning is essential. For many taxpayers, the window to preserve the right to a refund may close on July 10, 2026. This date is tied to the IRS statute of limitations.

The government is expected to appeal the recent court decision, meaning a final resolution could take time. If you simply wait for the courts to settle the matter and miss the filing deadline in the meantime, you permanently lose your right to claim your money—even if the final ruling heavily favors taxpayers.

To prevent this, we advise potentially affected clients to file a protective refund claim. Think of this as officially holding your place in line. It does not guarantee a payout today, but it ensures you remain eligible to recover those funds if the broader interpretation of COVID-era relief is upheld.

Want Tax Help?
Blumark Tax Advisors offers tax planning, tax preparation, and financial advisory services tailored just for you.
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Who Should Be Looking Into This?

At Blumark Tax Advisors, we are keeping a close eye on this for our clients across Michigan and the broader United States. You may be impacted if you fall into any of these categories:

  • Business owners who were assessed late payment penalties between 2020 and 2023

  • Taxpayers who filed returns late during the pandemic window

  • Individuals who entered into installment agreements after penalties had accrued

  • Entrepreneurs who paid significant IRS interest charges during the federal disaster period

Financial statistics

The Paperwork Hurdle

Ironically, claiming this modern relief requires a rather outdated process. Current IRS guidance suggests these protective claims cannot be e-filed. Instead, they require preparing and mailing formal paper documentation. While taxpayer advocates are pushing for an automated, systemic fix, relying on paper filings is the reality for now.

Let Us Help You Protect Your Wealth

Tax law becomes incredibly nuanced when temporary emergency measures clash with standard IRS enforcement. If you or your business absorbed penalties or interest tied to COVID-era delays, do not leave potential capital on the table.

At Blumark Tax Advisors, our team—led by Shannon K. Klug—focuses on turning complex tax situations into clear, strategic opportunities. We can review your tax history from 2020 to 2023, determine if a protective refund claim makes sense for your financial picture, and handle the necessary paperwork before the statute of limitations expires.

Contact our Auburn Hills office today to schedule a consultation. We are here to help you secure the refunds you deserve and maintain long-term financial clarity.

Want Tax Help?
Blumark Tax Advisors offers tax planning, tax preparation, and financial advisory services tailored just for you.
Contact Us
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