Accountancy Slice

North America

A recent federal court decision has opened the door for tens of millions of U.S. taxpayers to potentially reclaim penalties, interest payments and other charges imposed during the Covid-19 pandemic, after ruling that many IRS filing deadlines were effectively suspended. The judgment found that a 2019 law granting automatic deadline extensions for disaster victims, combined with the nationwide emergency declared in January 2020, meant that tax deadlines should have been paused until July 10th 2023. This contradicts the IRS’s earlier interpretation, under which deadlines remained in force, leading to widespread penalties for late filings and payments. The scope of the issue is significant, affecting individuals, small businesses and large corporations alike, with more than 28m penalties issued in fiscal 2022 alone, totalling over $12bn. Some companies, including large corporates, have already begun pursuing claims based on the ruling. The IRS’s national taxpayer advocate has urged taxpayers to review their eligibility and submit claims, typically via Form 843, before the key deadline of July 10th 2026, which reflects the standard three-year window for refund claims. However, the process may prove complex and slow, as claims must currently be filed on paper and could overwhelm IRS systems.