A federal court issued a ruling that could affect tens of millions of taxpayers: Nobody should have been required to file their taxes on time for a stretch from 2020 to 2023, the judge declared, because timely tax collecting should have been suspended during the coronavirus pandemic.
If the ruling withstands the government’s appeals, the IRS could owe refunds to anyone who was charged a late fee or penalty for failing to pay their taxes on time in those years. Judge Molly R. Silfen’s position is that people still owed taxes during the pandemic but shouldn’t have been required to pay them until the federally declared emergency ended in mid-2023.
U.S. law allows people not to pay their taxes on time during federally declared disasters. If your town is struck by a hurricane or wildfire, you don’t have to file your tax return until at least 60 days after the disaster ends. But most disasters last for days, not years. And most affect designated communities, not the entire country. The three-year-long federal emergency response to the pandemic was a unique situation.
In the view of the IRS, the law on suspending tax payments during a disaster didn’t apply to covid, and the tax agency kept collecting taxes and charging late fees to those who didn’t pay on time in 2020 through 2023. But some taxpayers challenged the late fees in court.
Silfen, a judge on the U.S. Court of Federal Claims, and others have ruled that tax payments shouldn’t have been considered overdue between mid-2020 to mid-2023, even for debts that predate the pandemic, according to the analysis of the U.S. Taxpayer Advocate Service.
The Taxpayer Advocate Service says that anyone who was charged a penalty or interest for not paying their taxes during those years might be able to get their money back — and they should file a claim for the money by July 10 of this year to ensure they don’t miss the legal deadline. That marks three years after the end of the pandemic disaster period, plus a 60-day legal grace period.
Taxpayers might even be able to get a break on interest they owe on older tax debts that predate the pandemic, if the courts end up deciding that the interest shouldn’t have kept growing during the pandemic years.
The IRS has not published complete statistics that would show how many people might be able to claim a refund, but the number is large. More than 10 million households paid late fees on their 2020 returns and more than 12 million on their 2021 returns, paying more than $3 billion in total for those two years. Businesses would also be eligible for refunds on their penalties.
If you believe you might be owed money back, you’ll need to file Form 843 by July 10 and mail it to the IRS. (The form can’t be submitted online.) The Taxpayer Advocate Service said that it is important to file it by the deadline and specify which tax year or years you overpaid, but it is okay if you don’t know the specific dollar amount.
The advocate advised: “Write ‘Protective Refund Claim Pursuant to Kwong Case’ or something similar across the top, and fill in as much detail as possible.”
People planning to file claims may want to read the Taxpayer Advocate Service’s complete three–part series on the issue, which goes into detail about who might be owed a refund and how to fill out the form.
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