Federal Courts Expand COVID Tax Relief for Businesses and Filers
Federal courts have expanded relief from IRS penalties and deadlines imposed during the COVID disaster period.
Why it matters: Business and individual taxpayers now have new legal support to challenge IRS penalties and seek COVID-era refunds. Legal teams must reassess client filings and strategy as IRS enforcement adapts to recent court guidance.
- A federal court held IRS tax deadlines were suspended from January 20, 2020, to July 10, 2023.
- Taxpayers may claim refunds on penalties and interest charged in this COVID disaster span.
- The courts require at least a 60-day automatic filing extension for disaster periods.
- Some international tax penalties are still subject to IRS discretion, outside of court control.
New federal court rulings give individuals and businesses stronger grounds to contest IRS penalties tied to the COVID-19 disaster period. Legal, finance, and tax teams should review affected filings for possible refunds or relief.
- In Kwong v. United States, the U.S. Court of Federal Claims ruled that Internal Revenue Code section 7508A(d)—which activates during federally declared disasters—suspended IRS tax deadlines from January 20, 2020 (when COVID was declared a disaster), to July 10, 2023 (end of the emergency).
- This means taxpayers facing late-file or late-pay penalties—or interest charges—during those dates may be eligible for refunds, changing many compliance and refund strategies.
- According to the Tax Court in Abdo v. Commissioner, IRS extensions must last at least 60 days in any federally declared disaster, and this is mandatory—no IRS discretion needed. This clarification broadens the automatic relief available to filers.
- However, the Second Circuit in Safdieh v. Commissioner clarified that some foreign information return penalties (under separate law) can still be enforced directly by the IRS without court involvement.
Legal advisers should audit client tax penalty assessments from the COVID disaster window. While courts opened refund paths, the IRS has not confirmed it will automatically honor every claim, and additional litigation is possible as reviews continue.
For a full rundown, see this detailed National Law Review analysis and direct case filings.
By the numbers:
- Jan. 20, 2020–July 10, 2023 — COVID disaster period affecting IRS deadlines
- 60 days — Minimum automatic extension of federal filing deadlines during disaster periods
Yes, but: The IRS has not confirmed if all COVID-era penalty refund claims will be approved; further litigation may follow.
What's next: Tax professionals await updated IRS guidance on implementation of the expanded COVID disaster relief.