IRS Pandemic Refund 4 Big Mistakes That Could Cost

17th March 2026

There’s a clock ticking on millions of dollars in IRS refunds and if you make one of these four mistakes, you’ll hear it stop on July 10, 2026.

Here’s what most people don’t realize: the pandemic didn’t just change how we worked and lived. It changed tax law in ways that are only now becoming clear. A federal court ruled last November that the COVID-19 public health emergency running from January 20, 2020 through May 11, 2023 automatically postponed tax deadlines for that entire period, plus 60 days. That means any penalties or interest the IRS charged you during that window might not have been legally owed.

But here’s the catch: the deadline to claim that money back is July 10, 2026 . Miss it, and the IRS keeps every penny.

“Millions of taxpayers could be eligible, but if people don’t file claims before July 10, 2026, they lose out on the potential for a refund or abatement,” warned Jon Wasser, a tax partner at Fox Rothschild.

The potential dollar amounts? Significant. One taxpayer is already suing for $20.8 million in pandemic-era interest. But you don’t need a million-dollar dispute to benefit you just need to avoid these four critical mistakes.

Mistake 1: Assuming You’re Not Eligible

The “That Doesn’t Apply to Me” Trap

The biggest mistake is also the simplest: thinking this doesn’t affect you. Most taxpayers assume pandemic relief was just about stimulus checks and expired credits. They’re wrong.

Here’s who should check their records:

• Anyone charged failure-to-file or failure-to-pay penalties between January 2020 and July 2023 
• Taxpayers who paid underpayment interest during that period 
• Businesses with installment agreements where interest accrued during the pandemic 
• Anyone with long-running IRS examinations that recently assessed interest covering 2020-2023 

The legal argument comes from I.R.C. § 7508A(d), which Congress amended in late 2019. The law automatically postpones tax deadlines for the period of a federally declared disaster plus 60 days. Because the COVID-19 disaster ran from January 20, 2020 to May 11, 2023, the argument goes that no taxes were technically due during that window meaning penalties and interest shouldn’t have accrued.

The Numbers Don’t Lie

Tax attorney Jessica Marine of Frost Law wrote in a blog post that “the potential dollar amounts could be significant, particularly for businesses that faced liquidity challenges during the pandemic and incurred substantial failure-to-pay penalties”.

Even if you think your penalties were small, checking takes minutes. The alternative? Leaving money on the table that’s rightfully yours.

The Deadline Clock

Eligibility Factor	What to Check	Why It Matters
Penalties Paid	Failure-to-file or failure-to-pay penalties from 2020-July 2023	May qualify for full refund
Interest Accrued	Underpayment interest during pandemic period	Kwong v. US suggests interest shouldn’t have accrued
Business Taxes	Large balances, installment agreements	Higher dollar amounts at stake
Ongoing Examinations	Recent assessments covering 2020-2023	May need protective claim

Mistake 2: Falling for Social Media Tax Scams

The Fraudulent Credit Trap

While legitimate refund opportunities exist, scammers and social media influencers are pushing fraudulent claims that will cost you dearly.

The IRS issued repeated warnings in 2024 about three recurring themes in tax scams that have tricked thousands of taxpayers into filing inflated refund claims.

Fuel Tax Credit: This credit is intended for off-highway business and farming purposes like operating a farm or purchasing aviation gasoline. The vast majority of taxpayers do not qualify. Yet social media posts continue pushing this as a “loophole.”

Sick and Family Leave Credits: These credits were available ONLY to self-employed individuals for tax years 2020 and 2021. The IRS has seen repeated instances of taxpayers incorrectly claiming credits based on income earned as employees, not as self-employed individuals.

Household Employment Taxes: Taxpayers have fabricated household employees and filed false claims for sick and family medical leave wages they never paid.

The Devastating Consequence

Here’s what the scammers don’t tell you: refunds are entirely frozen on returns with fraudulent claims. That means even if you had legitimate credits coming, you receive NOTHING while the IRS investigates.

“The refund amount is frozen on returns with these bad claims,” the IRS warned, meaning taxpayers “will not receive any refund amount”.

And the penalties? Up to $5,000 per return for filing frivolous claims, plus the risk of audit or criminal prosecution for knowingly filing a false return.

IRS Commissioner Danny Werfel put it bluntly: “Scam artists and social media posts have perpetuated a number of false and misleading claims that have tricked well-meaning taxpayers into believing they’re entitled to big, windfall tax refunds”.

How to Protect Yourself

If you’ve already filed such a claim, you may need to file an amended return to remove ineligible claims before the IRS catches it. The IRS has created a tool called “Should I file an amended return?” to help taxpayers determine if they need to correct their filings.

Mistake 3: Missing the July 10, 2026 Deadline

The Statute of Limitations You Can’t Ignore

Here’s the harsh math of tax law: refund claims generally must be filed within three years from the time the return was filed or two years from the time the tax was paid, whichever is later.

Because the court ruling in November 2025 suggested tax deadlines were moved to July 10, 2023, three years from that date lands squarely on July 10, 2026.

Jon Gustafson of Venn Tax and Bookkeeping put it in plain English: “The deadline on this is July 10 of this year, so after July 10, you’re too late. You can’t request those funds”.

The “Protective Claim” Strategy

Here’s where it gets strategic. The IRS is likely to appeal the Kwong decision. The law is still developing. But you don’t have to wait for the final outcome.

Tax professionals recommend filing a protective claim using IRS Form 843. This preserves your right to a refund while the courts sort things out.

“You’re basically telling the IRS, ‘here’s a refund claim, put it on hold for now’ until the case has a final determination,” Wasser explained. “You just need to put the IRS on notice now”.

What Happens If You Miss It

Miss the deadline, and the IRS keeps every penny even if the courts ultimately rule taxpayers should get their money back. The statute of limitations is absolute. No exceptions. No appeals. July 10 passes, and your opportunity evaporates.

Mistake 4: Filing Incorrectly or Without Documentation

The Form 843 Trap

Even taxpayers who know about the refund opportunity often mess up the filing itself.

The correct form is IRS Form 843, Claim for Refund and Request for Abatement. But here’s what most people miss: you must specifically reference the legal basis for your claim.

Tax lawyers emphasize that you should specify on the form that it’s “a protective claim based on the Kwong v. United States decision regarding Section 7508A(d) and the COVID-19 disaster period”.

Without this specific language, the IRS may not connect your claim to the pandemic relief argument, and your filing could be rejected or ignored.

The Documentation You Actually Need

Before filing, you need to verify what penalties and interest you actually paid. Here’s how:

Check your IRS tax account transcripts. These show each year’s tax information, including filing status, taxable income, adjustments after processing, and crucially payments, penalties, and interest with dates they were assessed or paid.

You can get transcripts by:

• Registering for an Individual Online Account on IRS.gov 
• Ordering by mail on the IRS website
• Calling the automated transcript service at 800-908-9946 

Transcripts typically arrive in five to ten calendar days.

The International Student Trap

There’s a special warning here for international students and non-residents. In December 2024, the IRS began issuing $1,400 payments for unclaimed Recovery Rebate Credit to individuals who didn’t file 2021/2022 returns. But many non-residents received these payments in error and if you did, you must return them.

Non-resident aliens were NOT eligible for COVID stimulus payments . If you received one and were a non-resident in 2020 or 2021, you’re required to return the money and clarify your non-resident status for those years.

The MIT International Students Office provides detailed instructions:

• If you haven’t cashed the check: write “VOID” on the back and return it to your local IRS office 
• If you cashed it or received direct deposit: bring a personal check or money order payable to “U.S. Treasury” with “2021EIP” and your taxpayer ID 

Failing to return erroneous payments creates its own tax problems down the road.

Quick Reference: The Four Mistakes

Mistake	What It Looks Like	How to Avoid It
Assuming Ineligibility	“I didn’t get stimulus checks, so this doesn’t apply to me”	Check transcripts for penalties/interest from 2020-2023
Falling for Scams	Filing for fuel credits, fake household employees based on social media tips	Verify credit eligibility with tax professional
Missing the Deadline	Waiting for IRS guidance or court appeals to finish	File protective claim by July 10, 2026 regardless
Incorrect Filing	Using wrong form, missing legal citations, no documentation	Use Form 843, reference Kwong case, attach transcripts

FAQs

The Bottom Line

Let’s cut through the complexity and state what’s actually happening:

There’s a narrow window to claim refunds on pandemic-era penalties and interest and that window closes July 10, 2026.

The legal foundation is solid. Section 7508A(d) of the tax code automatically postpones deadlines during federally declared disasters. The COVID-19 disaster lasted over three years. A federal court has already ruled in Kwong v. United States that this language means what it says: taxes weren’t due during that period, so penalties and interest shouldn’t have accrued.

But here’s the reality check: the IRS will likely appeal. The law is still developing. And the deadline doesn’t wait for courts to finish arguing.

Your move is simple:

1. Check your transcripts. Pull IRS tax account transcripts and identify any penalties or interest assessed between January 2020 and July 2023.
2. Estimate your stake. Focus on high-impact tax periods first.
3. File a protective claim. Use Form 843, reference the Kwong case, and submit before July 10.
4. Avoid scams. Don’t fall for social media posts promising “free money” through fuel credits or fake household employees.

Conclusion: The Clock Is Ticking

The pandemic was many things traumatic, disruptive, exhausting. But it may also have been, in the eyes of tax law, a three-year period when filing deadlines simply didn’t apply.

That interpretation, now backed by federal court precedent, opens the door for millions of taxpayers to recover penalties and interest they never should have paid. But the door doesn’t stay open forever.

July 10, 2026 isn’t a suggestion. It’s a hard deadline. After that, the statute of limitations slams shut, and whatever you might have recovered stays with the IRS permanently. The four mistakes we’ve covered assuming ineligibility, falling for scams, missing the deadline, and filing incorrectly are entirely avoidable. Each one requires only awareness and action.

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