Recent court decisions have opened a potential pathway for tens of millions of American taxpayers — both individuals and businesses — to seek refunds for penalties and interest assessed by the IRS during the COVID-19 federal disaster period. The National Taxpayer Advocate has described this as a widespread issue affecting a broad cross-section of the public, and has urged affected taxpayers to review their situations before a key filing deadline.
If you were assessed penalties or interest during the COVID disaster period (January 2020 through mid-2023), you may want to explore your options. Start your free review here to understand your situation before the July 10, 2026 filing date.
In November 2025, a federal court issued a ruling that interpreted the tax code's disaster-relief provisions in a way that could affect how penalties and interest were calculated during the COVID-19 federal disaster period. The disaster period ran from January 20, 2020, through mid-2023.
The National Taxpayer Advocate, an independent organization within the IRS, subsequently published a detailed notice indicating that tens of millions of taxpayers — including individuals, small businesses, large corporations, estates, and trusts — were assessed penalties or interest during this period that may be subject to review based on the court's interpretation.
It is important to note that this court decision may still be appealed, and the legal landscape remains uncertain. However, the Taxpayer Advocate has emphasized the importance of awareness so that affected taxpayers have the opportunity to review their options.
According to public reporting from the National Taxpayer Advocate and major news outlets, the categories of taxpayers who may want to consult with a tax professional include:
This extends beyond just individual income taxes. According to the Taxpayer Advocate, the issue touches income, employment, estate, gift, and excise taxes.
Businesses that previously received the Employee Retention Credit (ERC) during the pandemic may also want to review their situation. Some businesses that claimed the ERC were assessed penalties or interest related to their employment tax returns during the COVID disaster period. Depending on the circumstances, these assessments could fall within the scope of the recent court interpretation.
Additionally, businesses that are currently navigating ERC claim reviews, disallowances, or audits may want to consider whether the disaster-period analysis has any bearing on their specific circumstances. The IRS has recently introduced processes for businesses with disallowed ERC claims, and the intersection of these developments is complex enough that professional guidance is recommended.
The Taxpayer Advocate has noted that most taxpayers who wish to file a claim would need to do so by July 10, 2026. This date is based on the standard filing windows under the tax code and is tied to the statute of limitations for refund claims.
After this date, the ability to file a claim may no longer be available for many taxpayers, regardless of the outcome of ongoing legal proceedings. The Taxpayer Advocate has specifically expressed concern that taxpayers without professional representation are at the greatest risk of missing this window.
The Taxpayer Advocate has encouraged taxpayers who believe they may be affected to speak with a qualified tax professional. The issues involved are complex and fact-specific, and the right course of action depends on each taxpayer's individual circumstances.
For those who want to take action, the general steps being discussed by tax practitioners include:
If you are an individual or business owner who was assessed penalties or interest during the COVID-19 disaster period and want to explore whether you may have options, you can begin the review process through our partner portal:
This portal is designed to help individuals and businesses understand their situation and take appropriate next steps. There is no cost to begin the review process.
At Blue Group Capital, we work with business owners every day on financing and financial strategy. While we do not provide tax or legal advice, we believe in helping our clients stay informed about developments that could impact their businesses.
If your business recovers funds through this process, those funds could be deployed toward growth initiatives such as equipment purchases, inventory expansion, hiring, or paying down existing obligations. A business line of credit can also help bridge cash flow gaps while you wait for the review process to conclude.
If you have questions about how a potential recovery could affect your business financing needs, our team is here to help. Contact Blue Group Capital to discuss your options.
No. Based on current reporting, affected taxpayers would need to take action and file a claim on their own. The Taxpayer Advocate has specifically noted that this relief is not automatic and that most taxpayers must file a claim to request a refund or abatement.
No. This situation arises from a court interpretation of existing tax law provisions related to disaster declarations. The outcome for individual taxpayers depends on their specific circumstances and the evolving legal landscape. It is not a new program or a guarantee of any specific result.
The Taxpayer Advocate and multiple tax experts quoted in national reporting have strongly recommended that taxpayers consult with a qualified tax professional before taking any action. The issues are complex and each taxpayer's situation is different.
Based on the standard refund claim filing windows, most taxpayers who want to file a claim would need to do so by July 10, 2026. This is based on the statute of limitations provisions in the tax code.
It may, depending on the specific circumstances. Businesses that were assessed penalties or interest on employment tax returns during the COVID disaster period may want to review whether those assessments are subject to the same analysis. A tax professional can help evaluate the specific facts.
According to the Taxpayer Advocate, the types of assessments that may be subject to review include failure-to-file penalties, failure-to-pay penalties, estimated tax penalties, and interest that accrued during the COVID federal disaster period. The scope depends on individual circumstances.
If a business recovers funds through this process, those funds could be used for growth initiatives, equipment purchases, inventory, or paying down existing obligations. Blue Group Capital can help business owners plan for how to use recovered capital strategically. Contact us to discuss your options.
Check If You May Have Options — Start Your Free Review →
No cost to begin. Review your situation before the July 10, 2026 filing date.
Blue Group Capital LLC provides financing for businesses in the US and Canada.
4800 N. Federal Highway
Boca Raton, FL 33431
5700 Yonge St
North York, ON M2M 4K2
*Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice.
