Court ruling could result in millions of dollars in IRS coronavirus tax refunds
A federal court ruling has brought back the issue of COVID-19-era taxes and could leave some Americans owed refunds.
Assistance is available to tens of millions of Americans who may receive a coronavirus-related IRS refund but don’t know how to apply for it.
Last November’s court ruling in Kwon v. United States suggests that some penalties and interest levied during the nearly three-and-a-half-year federal COVID-19 disaster period may have been inappropriate, meaning taxpayers may be entitled to refunds or reductions in those amounts. The government is appealing the decision, so refunds are not guaranteed, but there is no time to wait. The deadline to make a claim is July 10th, or Americans will lose their chance to get that money forever.
But determining whether you or your business is eligible for a tax refund or relief, how much and how to apply can be difficult, as legal red tape still remains. Independent Tax Advocate Erin Collins and other law firms and accountants have published guidelines and steps Americans can take to resolve this issue, but even those may require a lot of effort and patience. To make things easier, companies are now creating quick and simple tools to help.
“Time is of the essence for those considering applications,” said Glenn Frost, a founding partner at Frost Law. “Given the calendar and mailing requirements, this is not something to postpone until the last moment.”
Although July 10 is only about a month away, Frost cautioned that it could still take a week or so for businesses to receive and evaluate their IRS tax data.
What do I need to use the tool?
Taxpayers simply need to verify their identity and sign an IRS form so that their attorney or accountant can view their IRS tax return. After we verify your return, you will be notified if it is eligible and how much you will receive.
Tools such as those offered by Frost Law and CovidTaxRefunds.com take a few minutes to complete. You can check out Frost’s tools for free in advance, but you may have to pay if you decide to have Frost’s tools file a claim to protect your right to a refund or reduction if the Kwong decision survives appeal. CovidTaxRefunds charges a flat fee to evaluate and prepare your penalty and interest refund claim.
Who is eligible for a refund or reduction?
Collins said any taxpayer could qualify, including individuals, small businesses, large corporations, estates and trusts.
“This issue extends to taxpayers with obligations related to income, employment, inheritance, gift, and excise taxes,” he said in a blog post. “Taxpayers who file international information declarations late may also be affected and may be subject to significant penalties even if they do not owe any tax.”
How much money does it cost?
Billions of dollars in refunds are at stake, Frost said. The amounts vary widely from taxpayer to taxpayer, but in some cases, tax refunds or relief can be large, especially for businesses or taxpayers with large delinquent penalties.
Western Digital sued the government in February, seeking a partial refund of $53.6 million in taxes it paid in August 2023, when a tax dispute dating back to 2008 was resolved. The data storage company said it should not have been charged nearly $21 million in interest during the pandemic pause.
People “are only eligible if they submit their application by the July deadline,” Frost sad. “We continue to urge people to review their eligibility immediately and decide whether it is worth pursuing.”
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday..
