The headlines scream, “Millions may be owed a COVID tax refund.” The reality is much less exciting. You may indeed have the right to a refund, but it will be for certain penalties charged for tax returns filed during the pandemic.
“This is a situation where a technical tax ruling could have real taxpayer impact, but it’s not as simple as ‘the IRS owes everyone money,'” Dave Bohrman, co-founder and vice president of marketing at Tax Guard, told Yahoo Finance.
Here are the details.
A recent court decision clarified the tax deadlines in place during disasters, such as the COVID-19 pandemic. The ruling addressed the IRS suspension of certain federal tax deadlines from Jan. 20, 2020, through July 10, 2023.
The November 2025 court ruling said that taxpayers are allowed to claim refunds for penalties assessed for filing and/or paying late, for underpaying the amount due on a return, and for other penalties and interest.
“Although the case was decided several months ago, it has recently begun attracting more attention as tax practitioners recognize its potential scope and the approaching deadlines to file refund claims,” Ivan H. Golden, a Chicago-based partner with the Taft law firm, recently wrote in an analysis of the decision.
Knowing whether you will benefit from the court ruling will take some research into your tax filing history.
“The opportunity depends on whether someone was actually assessed penalties during the COVID period, and that’s where it gets complicated,” Bohrman said. “It requires people to go back, review what was charged, and, in some cases, take action to preserve their eligibility.”
“The amount of potential refunds could be significant for taxpayers who resolved audits or paid substantial tax liabilities during the pandemic years,” Golden wrote.
He also observed that there is an important time element to consider: Possible statutes of limitation for pandemic-era refund claims may begin to expire in 2026.
However, there is a lot of uncertainty involving the case.
Bohrman said the IRS is expected to challenge the ruling, so many advisors are recommending protective claims while the legal process plays out.
“The biggest risk is that taxpayers who may qualify simply never check. With a defined deadline, it becomes a matter of awareness and follow-through,” he added.
If you think you may be owed a sizable refund under the parameters of the court decision, you should consult with a tax professional to determine your next steps.
